Document:

Exhibit 10.1

EXECUTION COPY

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, dated as
of April 2, 2007, by and among Quadrangle Master Funding Ltd, a Cayman Islands
exempted company incorporated with limited liability (“QMFL” and
together with QDRF Master Ltd, a Cayman Islands exempted company incorporated
with limited liability, Quadrangle Debt Opportunities Fund Master Ltd, a Cayman
Islands exempted company incorporated with limited liability and any other
Affiliates that receive Common Shares in a Permitted Transfer (as defined
below), “QDRF”), POI Acquisition, LLC, a Delaware limited liability
company (together with any of its Affiliates that receive Common Shares in a
Permitted Transfer, “POI Acquisition”), and Protection One, Inc., a
Delaware corporation (the “Company”). Each of QDRF and POI Acquisition
is referred to individually as a “Stockholder” and, collectively, as the
“Stockholders”.

WHEREAS, the parties hereto entered into a
Stockholders Agreement, dated as of February 8, 2005 (the “Original
Stockholders Agreement”), providing, among other things, for certain
arrangements relating to governance of the Company and transfers by the
Stockholders;

WHEREAS, pursuant to a merger agreement, dated as of
December 20, 2006, entered into by and between Integrated Alarm Services Group,
Inc. (“IASG”), the Company and Tara Acquisition Corp. (the “Merger
Agreement”), IASG has become a wholly-owned subsidiary of the Company, with
shareholders of IASG receiving Common Shares (the “Merger”); and

WHEREAS, in connection with the Merger the Company and
each of the Stockholders desire to amend and restate the Original Stockholders
Agreement.

NOW, THEREFORE, in consideration of the premises and
of the mutual covenants and agreements herein contained, the parties hereto
hereby agree to amend and restate the Original Stockholders Agreement as
follows:

ARTICLE I

DEFINITIONS

Section
1.1   Definitions (a)   
As used in this Agreement, the following capitalized terms shall have
the following meanings:

Acquisition
Designees: As defined in Section 2.1(a)(i) herein.

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

Board of Directors:  The board of directors of the Company.

Business Day:  A day other than a Saturday, Sunday, federal
or New York State holiday or other day on which commercial banks in New York
City are authorized or required by law to close.

Cash Equivalents:  Any of the following:

(1)                                  securities
issued or directly and fully guaranteed or insured by the United States
Government or any agency or instrumentality of the United States (provided that the full faith and credit of
the United States is pledged in support thereof), having maturities of not more
than one year from the date of acquisition;

(2)                                  marketable
general obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition of the United States (provided that the full faith and credit of
the United States is pledged in support thereof) and, at the time of acquisition,
having a credit rating of “A” or better from either Standard & Poor’s
Ratings Services or Moody’s Investors Service, Inc.;

(3)                                  certificates
of deposit, time deposits, eurodollar time deposits, overnight bank deposits or
bankers’ acceptances having maturities of not more than one year from the date
of acquisition thereof issued by any commercial bank the long-term debt
of which is rated at the time of acquisition thereof at least “A” or the
equivalent thereof by Standard & Poor’s Ratings Services, or “A” or the
equivalent thereof by Moody’s Investors Service, Inc., and having combined
capital and surplus in excess of $500 million; or

(4)                                  commercial
paper rated at the time of acquisition thereof at least “A-2” or the
equivalent thereof by Standard & Poor’s Ratings Services or “P-2” or
the equivalent thereof by Moody’s Investors Service, Inc., or carrying an
equivalent rating by a nationally recognized rating agency, if both of the two
named rating agencies cease publishing ratings of investments, and in any case
maturing within one year after the date of acquisition thereof.

Common Shares:  The shares of common stock, $0.01 par value
per share, of the Company.

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

Excluded Securities:  As defined in Section 5.2 herein.

Independent Person: A person (x) who
is not: (i) a holder of more than 5% of the outstanding Common Shares, or an
officer, employee or partner of the Company; (ii) a creditor, customer,
supplier or other person who derives more than 10% of its purchases or revenues
from its activities with the Company; (iii) a member of the immediate family of
any such stockholder, officer, employee, partner, creditor, customer, supplier
or other person and (y) who does not

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have a relationship with the Company that may
interfere with his exercise of independence from management and the Company.

Marketable Securities: securities
that are traded on an established securities exchange, reported through an
established over-the-counter trading system or otherwise traded
over-the-counter.

Permitted Transfer: As defined in
Section 3.2.

Permitted Transferee: As defined in
Section 3.2.

Person:  Any individual, partnership, limited
liability company, joint venture, syndicate, sole proprietorship, company or
corporation, unincorporated association, trust, trustee, executor,
administrator or other legal personal representative, regulatory body or
agency, government or governmental agency, authority or entity however
designated or constituted.

POI Acquisition:  As defined in the recitals.

Protection One Entities:  The Company and its Subsidiaries.

QMFL:  As defined in the recitals.

QDRF:  As defined in the recitals.

QDRF Designee: As defined in Section
2.1(a)(ii) herein.

Registered Sale: A sale of Common
Shares effected pursuant to an effective registration statement under the
Securities Act in accordance with the Registration Rights Agreement.

Registration Rights Agreement:  The registration rights agreement dated as of
February 8, 2005 by and among POI Acquisition, QMFL and the Company.

Rule 144 Sale: A sale of Common
Shares pursuant to Rule 144 promulgated under the Securities Act (or any
similar rule then in effect).

SEC: The U.S. Securities and
Exchange Commission or its successor.

Securities Act: The U.S. Securities
Act of 1933, as amended from time to time and the rules and regulations
promulgated thereunder.

Stockholder Designee: Any of the
Acquisition Designees or the QDRF Designee.

Subsidiary: An entity in respect of
which another entity owns, directly or indirectly, at least a majority of the
securities entitled to vote for the election of directors or the members of a
similar governing body.

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Trigger Event: The Company ceasing
to qualify as a “controlled company” for purposes of the applicable standards
of the securities exchange on which the Common Shares are listed.

(b)   When used in this
Agreement, the term “including” shall be deemed to mean “including, without
limitation”. The words “hereof,” “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Article and Section
references are to this Agreement unless otherwise specified.  The meanings given to terms defined herein
shall be equally applicable to both the singular and plural forms of such terms.

ARTICLE II

CORPORATE GOVERNANCE

Section 2.1   Board
of Directors Representation.  (a)    Effective as of the date hereof, the
Stockholders and the Company shall use their reasonable best efforts to cause
the Board of Directors to be comprised of nine directors of whom:

(i)                                 three shall be designated
by POI Acquisition (the “Acquisition Designees”);

(ii)                              two shall be designated by
QDRF (the “QDRF Designees”);

(iii)                           two shall be designated
pursuant to the Merger Agreement for a period of not less than two years from
the date hereof;

(iv)                          one shall be Richard Ginsburg,
president and chief executive officer of the Company; and

(iv)                              one
shall be an Independent Person selected by a majority of the other directors,
which person shall initially be Robert J. McGuire.

(b)   At such time as POI Acquisition
shall cease to own Common Shares in an amount equal to at least 25% of the
Common Shares issued and outstanding as of the effective date hereof, POI
Acquisition shall have the right to designate two Acquisition Designees rather
than three Acquisition Designees pursuant to Section 2.1(a) above. At such time
as POI Acquisition shall cease to own Common Shares in an amount equal to at
least 15% of the Common Shares issued and outstanding as of the effective date
hereof, POI Acquisition shall have the right to designate one Acquisition
Designee rather than two Acquisition Designees pursuant to Section 2.1(a)
above. At such time as POI Acquisition shall cease to own Common Shares in an
amount equal to at least 10% of the Common Shares issued and outstanding as of
the effective date hereof, POI Acquisition shall cease to have the right to
designate a director to the Board of Directors pursuant to Section 2.1(a)
above. Upon each of the triggering events set forth in this Section 2.1(b)
above, POI Acquisition shall promptly cause one of its Acquisition Designees to
resign from the Board of Directors and all committees thereof. Upon any such
resignation, the Stockholders will use their reasonable best efforts to cause
the directors

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remaining in
office to either decrease the size of the Board of Directors to eliminate such
vacancy or cause the vacancy created thereby to be filled by a designee
selected by a majority of the directors remaining in office.

(c)   At such time as QDRF shall
cease to own Common Shares in an amount equal to at least 15% of the Common
Shares issued and outstanding as of the effective date hereof, QDRF shall have
the right to designate one QDRF Designee to the Board of Directors rather than
two QDRF Designees pursuant to Section 2.1(a) above. At such time as QDRF shall
cease to own Common Shares in an amount equal to at least 10% of the Common
Shares issued and outstanding as of the effective date hereof, QDRF shall cease
to have the right to designate a director to the Board of Directors pursuant to
Section 2.1(a) above. Upon each of the triggering events set forth in this
Section 2.1(c) above, QDRF shall promptly cause one of its QDRF Designees to
resign from the Board of Directors and all committees thereof. Upon any such
resignation, the Stockholders will use their reasonable best efforts to cause
the directors remaining in office to either decrease the size of the Board of
Directors to eliminate such vacancy or cause the vacancy created thereby to be
filled by a designee selected by a majority of the directors remaining in
office.

(d)   At such time as Mr.
Ginsburg ceases to be the chief executive officer of the Company, he shall no
longer be entitled to serve as a director pursuant to Section 2.1(a)
above.  Upon any such resignation, the
Stockholders will use their reasonable best efforts to cause the directors
remaining in office to either decrease the size of the Board of Directors to
eliminate such vacancy or cause the vacancy created thereby to be filled by a
designee selected by a majority of the directors remaining in office.

(e)   Each Stockholder agrees to
vote, or act by written consent with respect to, any Common Shares owned
directly or indirectly by it, at each annual or special meeting of stockholders
of the Company at which directors are to be elected or to take all actions by
written consent in lieu of any such meeting as are necessary, and the Company
shall use its reasonable best efforts to take all appropriate actions as are
necessary, to cause the Board of Directors to be comprised of the number and
type of directors specified in Section 2.1(a). In conjunction with a Trigger
Event and effective immediately prior to the consummation thereof, the
Stockholders and the Company shall take all action necessary and appropriate to
reconstitute the size and composition of the Board of Directors in accordance
with the listing rules of the applicable securities exchange; provided, however,
that in the case of any such reconstitution of the Board of Directors, POI
Acquisition shall remain entitled pursuant to Section 2.1(a) to designate the
Acquisition Designees (subject to Section 2.1(b)), QDRF shall remain entitled
to designate the QDRF Designee (subject to Section 2.1(c)), Mr. Ginsburg shall
remain entitled to serve as a director (subject to Section 2.1(d)) and the
Company shall continue to perform its obligations under the Merger Agreement
with respect to directors designated thereunder.

(f)   Until such time as POI
Acquisition ceases to own Common Shares in an amount equal to at least 40% of
the Common Shares issued and outstanding as of the effective date hereof, POI
Acquisition shall have the right, exercisable at any time upon delivery of
written notice to QDRF and the Company, to elect to cause the Board of
Directors to be increased to include two additional directors and to designate
such directors, and shall similarly have the right to designate one additional
director to the extent that POI Acquisition owns

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Common Shares
in an amount equal to at least 35% (but less than 40%) of the Common Shares
issued and outstanding as of the effective date hereof (the “Acquisition
Election”). Upon making the Acquisition Election, the Stockholders (and
their respective Stockholder Designees) and the Company shall use their
reasonable best efforts to take all appropriate action to cause the size of the
Board of Directors to be increased to include the director(s) designated by POI
Acquisition. Upon making the Acquisition Election, (i) the number of
Acquisition Designees set forth in Section 2.1(a)(i) shall be increased by the
number of Acquisition Designees so designated and (ii) at such time as POI
Acquisition shall cease to own the requisite percentage of Common Shares issued
and outstanding to designate one or more directors pursuant to this Section
2.1(f), POI Acquisition shall promptly cause such Acquisition Designee(s) to
resign from the Board of Directors and all committees thereof. Upon any such
resignation, the Stockholders will use their reasonable best efforts to cause
the directors remaining in office to either decrease the size of the Board of
Directors to eliminate such vacancy or cause the vacancy created thereby to be
filled by a designee selected by a majority of the directors remaining in
office.

(g)   If any Stockholder entitled
to designate directors hereunder requests in writing that any of its designees
be removed as a director, the other Stockholder shall vote, or act by written
consent with respect to, all Common Shares owned directly or indirectly by such
other Stockholder and otherwise take or cause to be taken all actions necessary
to remove such director designated by such Stockholder. Unless a Stockholder
shall otherwise request in writing, no other Stockholder shall take any action
to cause the removal of any directors designated by such Stockholder. In the
event that a vacancy is created at any time by the death, disability,
retirement, resignation or removal (with or without cause) of any director
designated by a Stockholder, so long as such Stockholder has the right to
designate a replacement designee at such time, the Company and the other
Stockholder shall use their reasonable best efforts to take all appropriate
action necessary to cause the vacancy created thereby to be filled by the
replacement designated by such Stockholder.

(h)   POI Acquisition and QDRF
each shall be entitled to designate an employee, director or officer of such
entity or its Affiliates to serve as a nonvoting observer to the Board of
Directors (an “Observer”) at any time that such entity owns at least 5%
of the outstanding Common Shares. The Observer shall be permitted to attend all
meetings of the Board of Directors. The Company shall provide the Observer, in
the same manner as provided to directors, notice of such meetings and copies of
all materials, financial or otherwise, which the Company provides to its
directors; provided, however, that the Company may exclude the
Observer from access to any materials or from any meeting, or any portion of
the foregoing, if the Company reasonably believes upon advice of counsel that
such exclusion is reasonably necessary to preserve the attorney-client
privilege, to protect confidential or proprietary information or for other
similar reasons.

(i)   The parties hereto
acknowledge and agree that designation of a director as a Stockholder Designee
does not in itself preclude such director from being deemed “independent” for
purposes of applicable rules and regulations of the United States Securities
and Exchange Commission or the securities exchange upon which the Common Shares
are listed (each such qualifying director, an “Independent Designee”).

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(j)   For purposes of this
Agreement, a Stockholder shall be deemed to own its proportional interest of
any Common Shares held by a Person beneficially owned by such Stockholder
(determined based on such Stockholder’s pro rata direct or indirect equity
interest in such Person).

(k)   The Company shall reimburse
each Stockholder Designee and each Observer for their reasonable out-of-pocket
expenses incurred by them for the purpose of attending meetings of the Board of
Directors, the board of directors of any Subsidiary of the Company or the
respective committees thereof.

Section 2.2   Bylaws.   (a)    At the first meeting of the Board of
Directors following the date of this Agreement, the bylaws of the Company shall
be amended to provide that (i) until such time as POI Acquisition ceases to own
Common Shares in an amount equal to at least 20% of the Common Shares issued
and outstanding as of the effective date hereof, at least one of the
Acquisition Designees (other than an Independent Designee) shall be required to
be present to constitute a quorum of the Board of Directors and (ii) until such
time as QDRF ceases to own Common Shares in an amount equal to at least 20% of
the Common Shares issued and outstanding as of the effective date hereof, at
least one of the QDRF Designees (other than an Independent Designee) shall be
required to be present to constitute a quorum of the Board of Directors; provided,
however, that (x) any of the Stockholders may waive such right for any
given meeting of the Board of Directors and (y) none of the Stockholders may
use such provision in bad faith to avoid the taking of any action by the Board
of Directors.

(b)   If and for so long as POI
Acquisition has the rights described in Section 2.2(a)(i) above neither the
Company nor any other Stockholder shall, without the prior written consent of
POI Acquisition, take any action to amend the bylaws of the Company in any
manner that would impair POI Acquisition’s rights hereunder.  If and for so long as QDRF has the rights
described in Section 2.2(a)(ii) above neither the Company nor any other
Stockholder shall, without the prior written consent of QDRF, take any action
to amend the bylaws of the Company in any manner that would impair QDRF’s
rights hereunder.

Section 2.3.   Information and Inspection Rights. 
The Company shall furnish to each Stockholder that, together with its
Affiliates, owns at least 5% of the outstanding Common Shares such information
regarding the business, affairs, prospects and financial condition of the
Company and its Subsidiaries as such Stockholder may reasonably request and
shall permit such Stockholder or any of its designated representatives to
examine the books and records of the Company and its Subsidiaries (and to make
copies thereof and extracts therefrom), and to inspect their respective
facilities.

ARTICLE III

TRANSFERS

Section
3.1   Transfer Restrictions.  (a)    Subject to compliance with Sections 3.3 and
3.4, QDRF may directly or indirectly offer, transfer, sell, assign, pledge or
otherwise dispose of any economic, voting or other rights in or to (any such
act, a “transfer”) all or a portion of its

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Common
Shares at any time (i) in a Permitted Transfer, (ii) in a transfer pursuant to
Sections 4.2 or 4.3 or (iii) subject to compliance with Section 4.1, in any
other transfer.

(b)   Subject to compliance with
Sections 3.3 and 3.4, POI Acquisition may transfer all or a portion of its
Common Shares at any time  (i)
in a Permitted Transfer or (ii) subject to compliance with Section 4.2 hereof,
in any other transfer.

Section 3.2   Permitted Transfers; Indirect Transfers.  (a) 
Notwithstanding any other provision of this Agreement, a Stockholder
may:  (i) transfer Common Shares to an
Affiliate of such Stockholder, (ii) transfer Common Shares in a Registered
Sale, (iii) transfer Common Shares in a Rule 144 Sale or (iv) in the case of
QDRF, transfer Common Shares at any time it owns less than 10% of the
outstanding Common Shares (determined prior to any such transfer) (a “Below
10% Sale”) (each of the foregoing, a “Permitted Transfer” and each
of the transferees in a Permitted Transfer, a “Permitted Transferee”).

(b)   To the extent a Stockholder
or Permitted Transferee described in clause (i) above is not an individual or
an estate, and a Person (which is not a Permitted Transferee of the Stockholder
or of such Permitted Transferee, as the case may be) acquires Control of such
Stockholder or Permitted Transferee, (x) such acquisition of Control shall be
deemed to be a transfer of the Common Shares held by such Stockholder or
Permitted Transferee subject to the restrictions on transfer contained in this
Agreement (including, without limitation, Articles III and IV hereof) and (y)
to the extent such Stockholder or Permitted Transferee then holds assets in
addition to Common Shares, the determination of the purchase price deemed to
have been paid for the Common Shares held by such Permitted Transferee in such
deemed transfer for purposes of the provisions of this Agreement shall be made
by the Board of Directors in good faith.

Section 3.3   Notice of Proposed Transfer.  No fewer than 10 days prior to any proposed
transfer of any Common Shares by a Stockholder (other than under the
circumstances described in Article IV or pursuant to a Registered Sale or a
Rule 144 Sale), the Stockholder shall give written notice to the Company and
the other Stockholder of its intention to effect such transfer. Each such
notice shall describe the manner of the proposed transfer, the proposed date of
the transfer and the number of Common Shares proposed to be transferred and, if
requested by the Company, shall be accompanied by an opinion of counsel
reasonably satisfactory to the Company to the effect that the proposed transfer
of the Common Shares may be affected without registration under the Securities
Act.

Section 3.4   Validity of Transfers; Compliance with
Laws, Agreement.  (a)  Any attempt to transfer any Common Shares in
violation of this Agreement shall be null and void.  The Company shall not record on its stock
transfer books or otherwise any transfer of Common Shares in violation of the
terms and conditions set forth herein.

(b)   No transfer may be made
unless (i) the transfer complies in all respects with the applicable provisions
of this Agreement and (ii) the transfer complies in all respects with
applicable federal and state securities laws, including the Securities Act.

(c)   As a condition to any
transfer of Common Shares (other than pursuant to a  Registered Sale or a Rule 144 Sale or a Below
10% Sale), the transferee shall agree (pursuant to

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an agreement
in form and substance reasonably acceptable to the Company) to become a party
to this Agreement and shall have such rights and obligations of its transferor
for purposes of Articles III and IV; provided, that a transferee of
Common Shares pursuant to clause (i) of Section 3.2(a) shall have all of the
rights and obligations of the transferor Stockholder;  provided, further, that, in connection
with a transfer of at least 10% of the outstanding Common Shares by a
Stockholder, such Stockholder may also assign its rights and obligations under
Section 2.1 to such transferee, and in such circumstances, the transferee shall
have the rights and obligations of the transferor Stockholder under such
Section; provided, however, that such transferee shall not be
entitled to designate a Stockholder Designee or an Observer unless such
Stockholder Designee or Observer, as the case may be, is reasonably acceptable
to the Board of Directors.

ARTICLE IV

RIGHT OF FIRST OFFER,
TAG-ALONG SALE, DRAG-ALONG

Section
4.1.   Right of First Offer.  (a)    If QDRF (for purposes of this Section 4.1, a “Selling
Stockholder”) proposes to transfer (unless the proposed transfer is a
Permitted Transfer or a transfer pursuant to such Selling Stockholder’s “tag-along”
rights under Section 4.2, in which case the following provisions need not be
complied with) all or any portion of its Common Shares (the number of Common
Shares proposed to be transferred by the Selling Stockholder, the “Subject
Securities”), the Selling Stockholder shall deliver a notice of intention
to sell (a “Sale Notice”) to POI Acquisition (the “Offeree
Stockholder”) setting forth the number of Subject Securities proposed to be
transferred, an irrevocable offer to sell such Subject Securities to the
Offeree Stockholder and the terms and conditions pursuant to which the Selling
Stockholder is offering to sell such Subject Securities.

(b)   Upon receipt of a Sale
Notice, the Offeree Stockholder shall have the right to elect to purchase at
the price and on the terms and conditions stated in the Sale Notice, all, but
not less than all, of the Subject Securities (as allocated among the Offeree
Stockholder in their discretion).  In the
event that the Offeree Stockholder elects to purchase all of the Subject
Securities, the Offeree Stockholder shall so notify the Selling Stockholder
within 20 days (the “Option Period”) after the receipt by such party of
the Sale Notice.  Any such election shall
be made by written notice (a “Notice of Election”) to the Selling
Stockholder.

(c)   If a Notice of Election
with respect to the Subject Securities shall have been delivered to the Selling
Stockholder, the Selling Stockholder shall sell such Subject Securities to the
Offeree Stockholder designated in the Notice of Election at the price and on
the terms and conditions stated in the Sale Notice.

(d)   The closing of the sale of
Subject Securities to the Offeree Stockholder shall take place at the offices
of the Company, or such other location as the parties to the sale may mutually
select, on a date the parties may mutually select, no later than 30 days
following the expiration of the Option Period (or upon the expiration of such longer
period required to obtain any necessary regulatory approvals).  At such closing, the Selling Stockholder
shall deliver a certificate or certificates for the Subject Securities to be
sold, accompanied by stock powers with signatures guaranteed and all necessary
stock transfer taxes paid and stamps affixed, if

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necessary,
against receipt of the purchase price therefor by certified or official bank
check or by wire transfer of immediately available funds.

(e)   If the Offeree Stockholder
(and/or its assignee(s)) does not elect to purchase all of the Subject
Securities by the end of the Option Period, such Subject Securities may be sold
to any Person for a period of 180 days following the expiration of the Option
Period at a price not lower than the price specified in the Sale Notice and on
other terms and conditions not more favorable to the purchaser than those
specified in the Sale Notice. Any Subject Securities not sold by such 180th day
shall again be subject to the restrictions contained in this Section 4.1.

(f)   The Offeree Stockholder
shall be entitled to assign any or all of their rights under this Section 4.1
to any other Person.

Section
4.2.   Tag-Along Rights. 
(a)    In the event that POI Acquisition (for
purposes of this Section 4.2, a “Selling Stockholder”) proposes to
transfer (other than by way of a Permitted Transfer) all or any portion of the
Common Shares owned by such Selling Stockholder (any of the foregoing, a “Sale”),
then unless such Selling Stockholder is entitled to give and does give a
Drag-Along Notice pursuant to Section 4.3, such Selling Stockholder shall give
notice (a “Notice of Intention to Sell”) to the other Stockholder (for
purposes of this Section 4.2, the “Other Stockholder”) and the Company
promptly, and in any event not more than 10 days after the execution and
delivery by all the parties thereto of the definitive agreement relating to the
Sale, setting forth in reasonable detail the terms and conditions of such
proposed Sale, including the number of Common Shares proposed to be so
transferred, the name of the third party purchaser, the proposed amount and
form of consideration. In the event that the terms and/or conditions set forth
in the Notice of Intention to Sell are thereafter amended in any respect, the
Selling Stockholder shall give written notice (an “Amended Notice”) of
the amended terms and conditions of the proposed Sale promptly to the other
Stockholder and the Company.

(b)   The Other Stockholder shall
have the right, exercisable upon written notice to the Selling Stockholder
within 20 days after such Stockholder’s receipt of any Notice of Intention to
Sell, or, if later, within 20  days
of such Stockholder’s receipt of the most recent Amended Notice, to participate
in the proposed Sale by the Selling Stockholder to the proposed purchaser on
the terms and conditions set forth in such Notice of Intention to Sell or the
most recent Amended Notice, as the case may be (such participation rights being
hereinafter referred to as “tag-along” rights). Each Stockholder may
participate with respect to the Common Shares owned by such Stockholder in an
amount equal to the product obtained by multiplying (i) the aggregate number of
Common Shares owned by such Stockholder by (ii) a fraction, the numerator of
which is equal to the number of Common Shares proposed to be sold or
transferred by the Selling Stockholder and the denominator of which is the
aggregate number of Common Shares owned by the Selling Stockholder. If the
Other Stockholder has not notified the Selling Stockholder of its intent to
exercise tag-along rights 20 days after receipt of the Notice of Intention to
Sell or, if later, within 20 days of receipt of an Amended Notice, the Other
Stockholder shall be deemed to have elected not to exercise such tag-along rights
with respect to the Sale contemplated by such Notice of Intention to Sell or
such Amended Notice, as the case may be (in the case of an Amended Notice,
regardless of its election pursuant to the Notice of Intention to Sell relating
to such Sale).  If the number of Common
Shares elected to be sold by the Selling Stockholder and the Other Stockholder,
in addition to the number of Common Shares

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elected to be
sold by other stockholders of the Company (“Other Tagging Stockholders”)
pursuant to similar tag-along rights as those contained in this Agreement, is
greater than the number of Common Shares specified in the Notice of Intention
to Sell, the number of Common Shares being sold by each such holder shall be
reduced such that the applicable holder shall be entitled to (and obligated to)
sell only its pro rata portion of Common Shares (based on the number of Common
Shares owned by such holder to the total number of Common Shares owned by all
of such electing holders).  If a
Stockholder elects not to include the maximum number of Common Shares that such
holder would have been permitted to include in a proposed Sale, the Selling
Stockholder, the Other Stockholder and any Other Tagging Stockholders may sell
in the proposed Sale a number of additional Common Shares owned by any of them
equal to their pro rata portion of the number of Common Shares eligible to be
included in the proposed Sale and not so elected to be included (based on the
number of Common Shares owned by such holder to the total number of Common Shares
owned by all of such electing holders).

(c)   If the Other Stockholder
exercises its rights under this Section 4.2, the closing of the purchase of the
Common Shares with respect to which such rights have been exercised will take
place concurrently with the closing of the sale of the Selling Stockholder’s
Common Shares to the purchaser.

(d)   In connection with any Sale
pursuant to this Section 4.2, the Other Stockholder shall make to the purchaser
in the Sale the same representations, warranties, covenants, indemnities and
agreements as the Selling Stockholder makes in connection with the proposed
Sale (except that in the case of representations, warranties, covenants,
indemnities and agreements pertaining specifically to the Selling Stockholder,
a Stockholder exercising its “tag-along” rights shall make the comparable
representations, warranties, covenants, indemnities and agreements pertaining
specifically to itself); provided, that all representations, warranties,
covenants and indemnities shall be made by the Selling Stockholder, the Other
Stockholder and the Other Tagging Stockholders severally and not jointly. Each
Stockholder and any Other Tagging Stockholder participating in the Sale will be
responsible for funding its proportionate share of any escrow arrangements in
connection with the Sale and for its proportionate share of any withdrawals
therefrom.  All fees, commissions,
adjustments to purchase price, expenses and indemnities of the Selling
Stockholder, the Other Stockholder and any Other Tagging Stockholders
thereunder shall be borne by each of them on a pro
rata basis based on the number of Common Shares sold by each of them
in such Sale.

Section 4.3.   Drag-Along.  (a)    If (i) POI Acquisition (for purposes of this
Section 4.3, the “Selling Stockholder”) receives a bona fide offer from
any third party who is not an Affiliate of either the Company or POI
Acquisition to purchase (including a purchase by merger, consolidation or
similar transaction) 100% of the Common Shares owned by the Selling Stockholder
at such time, (ii) at least 90% of the fair market value of the consideration
to be received by the Selling Stockholder in such offer is in the form of cash,
Cash Equivalents or Marketable Securities and (iii) such offer is accepted by
the Selling Stockholder, then QDRF (for purposes of this Section 4.3, the “Other
Stockholder”) hereby agrees that, if requested by the Selling Stockholder,
it will transfer to such purchaser, subject to Section 4.3(b), on the terms of
the offer so accepted by the Selling Stockholder, including time of payment,
form of consideration and adjustments to purchase price, all of its Common
Shares.

 11

(b)   The Selling Stockholder
will give notice (the “Drag-Along Notice”) to the Other
Stockholder of any proposed transfer giving rise to the rights of the Selling
Stockholder set forth in Section 4.3(a) (a “Drag-Along Sale”) not more
than 10 days after the execution and delivery by all of the parties thereto of
the definitive agreement relating to the Drag-Along Sale and, in any event, no
later than 20 days prior to the closing date for such Drag-Along Sale. The Drag-Along
Notice will set forth the number of Common Shares proposed to be so
transferred, the name of the purchaser, the proposed amount and form of
consideration, the number of Common Shares sought and the other terms and
conditions of the offer.  The Other
Stockholder shall make the same representations, warranties, covenants,
indemnities and agreements as the Selling Stockholder makes in connection with
the Drag-Along Sale (except that in the case of representations, warranties,
covenants, indemnities and agreements pertaining specifically to the Selling
Stockholder, the Other Stockholder shall make the comparable representations,
warranties, covenants, indemnities and agreements pertaining specifically to
itself); provided, that all representations, warranties, covenants and
indemnities shall be made by the Selling Stockholder and the Other Stockholder
severally and not jointly and provided  further that in the event
that at the time of execution of the definitive agreement relating to such
Drag-Along Sale the Other Stockholder no longer retains the right to designate
the QDRF Designee pursuant to Section 2.1(a), the Other Stockholder shall be
required only to make representations, warranties, covenants, indemnities and
agreements pertaining specifically to itself consistent with the representations,
warranties, covenants, indemnities and agreements pertaining specifically to
the Selling Stockholder.  The Other
Stockholder will be responsible for funding its proportionate share of any
escrow arrangements in connection with the Drag-Along Sale and for its
proportionate share of any withdrawals therefrom.  The Other Stockholder also will be
responsible for its proportionate share of any fees, commissions, adjustments
to purchase price and expenses in connection with the of the Drag-Along
Sale.  If the Drag-Along Sale is not
consummated within 90 days from the date of the Drag-Along Notice (subject to
extension  to obtain any
necessary regulatory approvals), the Selling Stockholder(s) must deliver
another Drag-Along Notice in order to exercise their rights under this Section
4.3 with respect to such Drag-Along Sale.

ARTICLE V

PREEMPTION

Section 5.1   Preemptive Rights.  (a) 
Each Stockholder shall have the right to purchase for cash its
Preemptive Right Pro Rata Share of newly issued (i) Common Shares or (ii)
options or warrants to purchase, or securities convertible into or exchangeable
for, Common Shares (“Rights” and together with Common Shares, “POI
Securities”), in each case that the Company or any Subsidiary of the
Company may from time to time propose to sell for cash.  A Stockholder’s “Preemptive Right Pro Rata
Share” shall be, at any given time, that proportion, calculated prior to
any proposed new issuance, which the number of Common Shares owned by such
Stockholder at such time bears to the total number of Common Shares outstanding
at such time.

(b)   In the event the Company
proposes to undertake an issuance for cash of POI Securities to any Person, it
shall give the Stockholders written notice (the “Preemptive Notice”) of
its intention to sell POI Securities for cash, the price, the identity of the
purchaser and the

 12
 

principal
terms upon which the Company proposes to issue the same.  Subject to Section 5.1(a), each Stockholder
shall have ten Business Days from the delivery date of any Preemptive Notice to
agree to purchase a number of POI Securities up to its Preemptive Right Pro
Rata Share of POI Securities (in each case calculated prior to the issuance)
for the price and upon the terms specified in the Preemptive Notice by giving
written notice to the Company and stating therein the number of POI Securities
to be purchased.

(c)   In the event that any
Stockholder fails to purchase all of its Preemptive Right Pro Rata Share
pursuant to this Section 5.1, the Company shall have 180 days after the date of
the Preemptive Notice to consummate the sale of the POI Securities with respect
to which such Stockholder’s preemptive right was not exercised, at or above the
price and upon terms not more favorable to the purchasers of such POI
Securities than the terms specified in the initial Preemptive Notice given in
connection with such sale.

Section 5.2   Excluded Securities.  The parties hereby agree that the preemption
rights described in Section 5.1 shall not be exercisable with respect to any
issuance by the Company or any Subsidiary of the Company of the following
securities (“Excluded Securities”):

(a)  
any issuance of securities to officers, employees, directors or
consultants of any Protection One Entity in connection with such person’s
employment, consulting or director arrangements with a Protection One Entity;

(b)  
any issuance of securities in connection with any business combination
or acquisition transaction involving any Protection One Entity, including any
issuance to the equityholders or management of the entity that is the subject
of such business combination or acquisition transaction; or

(c)    any securities issued by the Company or a
Subsidiary of the Company pursuant to a public offering registered with the
SEC.

ARTICLE VI

Miscellaneous

Section 6.1   Effectiveness and Term.  This Agreement shall terminate upon (i) as to
any Stockholder, the date when such Stockholder owns less than 1% of the
outstanding Common Shares or (ii) upon a written agreement by the Stockholders
and the Company to terminate the Agreement.

Section 6.2   Recapitalizations, Exchanges, Etc.,
Affecting Common Shares.  The
provisions of this Agreement shall apply, to the full extent set forth herein
with respect to the Common Shares, and to any and all shares of the Company or
any successor or assign of the Company (whether by merger, consolidation, sale
of assets or otherwise) which may be issued in respect of, in exchange for, or
in substitution of the Common Shares, by reason of any stock dividend, stock
split, stock issuance, reverse stock split, combination, recapitalization,
reclassification, merger, consolidation or otherwise. Upon the occurrence of
any of such events, amounts hereunder shall be appropriately adjusted.

 13
 

Section 6.3   Headings. Headings of articles, sections
and paragraphs of this Agreement are inserted for convenience of reference only
and shall not affect the interpretation or be deemed to constitute a part
hereof.

Section 6.4   Severability. In the event that any
one or more of the provisions contained in this Agreement or in any other
instrument referred to herein shall, for any reason, be held to be invalid,
illegal or unenforceable, such illegality, invalidity or unenforceability shall
not affect any other provisions of this Agreement.

Section 6.5   Benefits
of Agreement.  Nothing expressed by
or mentioned in this Agreement is intended or shall be construed to give any
Person other than the parties hereto and their respective successors and
permitted assigns any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained, this Agreement and
all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of the parties hereto and their respective
successors and permitted assigns.  No
assignments of rights under this Agreement shall be permitted and any such
assignment shall be void, except an assignment to a transferee of Common Shares
of a Stockholder (other than a transferee in a Registered Sale, a Rule 144 Sale
or a Below 10% Sale) or an assignment of the Offeree Stockholder’s rights under
Section 4.1.

Section 6.6   Notices.  Any notice or other communications required
or permitted hereunder shall be deemed to be sufficient and received if
contained in a written instrument delivered in person or by courier or duly
sent by first class certified mail, postage prepaid, or by facsimile addressed
to such party at the address or facsimile number set forth below:

(1)                                  If
to the Company to:

Protection One, Inc

1035 N. 3rd Street, Suite 101

Lawrence, Kansas 66044

Telephone:  785-575-1707

Facsimile:  785-575-1711

Attention:  Darius G. Nevin

with a copy (which shall not constitute notice) to:

Kirkland & Ellis LLP

200 East Randolph Drive

Chicago, Illinois 60601

Telephone:  312-861-2000

Facsimile:   312-861-2200

Attention:  R. Scott Falk, P.C.

(2)                                  If
to POI Acquisition:

c/o Quadrangle Group LLC

375 Park Avenue

 14
 

New York, New York 10152

Telephone: 212-418-1700

Facsimile: 212-418-1701

Attention: Henry Ormond

(3)                                  If
to QDRF:

c/o Quadrangle Group LLC

375 Park Avenue

New York, New York 10152

Telephone: 212-418-1700

Facsimile: 212-418-1701

Attention: Michael Weinstock

in the case of notice to POI Acquisition or QDRF, with a copy (which
shall not constitute notice) to:

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017-3790

Telephone: 212-455-2000

Facsimile:  212-455-2502

Attention:  Joseph H. Kaufman

and

Willkie Farr &
Gallagher LLP

787 Seventh Avenue

New York, New York
10019-6099

Telephone: 212-728-8000

Facsimile: 212-728-8111

Attention: Michael Kelly

(4)                                  if
to any Stockholder other than POI Acquisition or QDRF, to it at the address set
forth in the records of the Company;

or, in any case, at such other address or facsimile
number as shall have been furnished in writing by such party to the other
parties hereto. All such notices, requests, consents and other communications
shall be deemed to have been received (a) in the case of personal or courier
delivery, on the date of such delivery, (b) in the case of mailing, on the
fifth business day following the date of such mailing and (c) in the case of
facsimile, when received.

Section 6.7   Amendments and Waivers.  (a) 
Neither this Agreement nor any provision hereof may be amended,
modified, changed or discharged except by an instrument in writing signed by
each of the parties hereto.

 15
 

(b)   No failure or delay by any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

Section 6.8   Counterparts.  This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but
one agreement.

Section 6.9   Specific Performance.  The parties hereto intend that each of the
parties have the right to seek damages or specific performance in the event
that any other party hereto fails to perform such party’s obligations
hereunder.  Therefore, if any party shall
institute any action or proceeding to enforce the provisions hereof, any party
against whom such action or proceeding is brought hereby waives any claim or
defense therein that the plaintiff party has an adequate remedy at law.

Section 6.10   Further Assurances.  Each of the parties shall, and shall cause
their respective Affiliates to, execute such documents and perform such further
acts as may be reasonably required or desirable to carry out or to perform the
provisions of this Agreement.

Section 6.11   No Recourse.  Notwithstanding anything that may be
expressed or implied in this Agreement, the Company and each Stockholder
covenant, agree and acknowledge that no recourse under this Agreement or any
documents or instruments delivered in connection with this Agreement shall be
had against any current or future director, officer, employee, general or
limited partner or member of any Stockholder or of any Affiliate or assignee
thereof, as such, whether by the enforcement of any assessment or by any legal
or equitable proceeding, or by virtue of any statute, regulation or other
applicable law, it being expressly agreed and acknowledged that no personal
liability whatsoever shall attach to, be imposed on or otherwise be incurred by
any current or future officer, agent or employee of any Stockholder or any
current or future member of any Stockholder or any current or future director,
officer, employee, partner or member of any Stockholder or of any Affiliate or
assignee thereof, as such, for any obligation of any Stockholder under this
Agreement or any documents or instruments delivered in connection with this
Agreement for any claim based on, in respect of or by reason of such
obligations or their creation.

Section 6.12   Confidentiality. Each Stockholder
acknowledges that in connection with its investment in the Company it shall
receive certain non-public, confidential proprietary information, which may
include memoranda, notes, analyses, reports, compilations or studies prepared
by or on behalf of the Company and its Subsidiaries (“Confidential Information”).
Notwithstanding anything to the contrary contained herein, each Stockholder
agrees to use the Confidential Information only for purposes of evaluating its
investment in the Company and it shall not use such Confidential Information in
connection with any competing business or investment or disclose any such
Confidential Information to any Person, except to the extent (i) such
information is already in the public domain (other than as a result of a
disclosure in breach of this Agreement); (ii) is already known by such
Stockholder from a Person under no obligation of confidentiality to the Company
at the time such information was received by such Stockholder

 16
 

or
is obtained by such Stockholder from a Person under no obligation of
confidentiality to the Company, (iii) the Company agrees in writing that such
information may be disclosed; or (iv) such disclosure is required by law; provided,
however, that any such disclosures be made only to the individual or
entity to whom disclosure is required by law and only after written notice to
the Company of the required disclosure. If Confidential Information is to be
disclosed pursuant to a requirement of law, the disclosing Stockholder agrees
to cooperate with the Company if the Company should seek to obtain an order or
other reliable assurance that confidential treatment shall be accorded to
designated portions of the Confidential Information.  Notwithstanding the foregoing, Stockholders
may disclose Confidential Information to their employees, directors, shareholders,
partners, members, agents and representatives who have a need to know of such
information in connection with such Stockholder’s investment in or the
management of the Company; provided, that such Persons agree to be bound
by the terms of this Section 6.13, and such Stockholder shall be liable for any
breach of the Stockholder’s obligations by such Persons.

Section 6.13   APPLICABLE LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Section 6.14   Jurisdiction; No Jury Trial. The
parties hereby irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of the courts of the State of New York for any actions,
suits or proceedings arising out of or relating to this Agreement and the
transactions contemplated hereby (and agree not to commence any action, suit or
proceeding relating thereto except in such courts, and further agree that
service of any process, summons, notice or document by U.S. registered mail to
its address set forth above shall be effective service of process for any
action, suit or proceeding brought against such party in any such court). The
parties hereby irrevocably and unconditionally waive any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in the courts of the State of New York,
and hereby further irrevocably and unconditionally waive and agree not to plead
or claim in any such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum. THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
SUIT PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER IN
ANY MATTERS ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.

Section 6.15   Entire Agreement.  This Agreement, together with the
Registration Rights Agreement and the Exchange Agreement constitutes the entire
agreement between the parties with respect to the subject mater of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.

 17
 

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

	
  

  	
  PROTECTION ONE,
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric
  Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  POI ACQUISITION,
  L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Henry Ormond

  
	
   

  	
  Name:

  	
  Henry Ormond

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  QUADRANGLE
  MASTER FUNDING LTD

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  Weinstock

  
	
   

  	
  Name:

  	
  Michael
  Weinstock

  
	
   

  	
  Title:

  	
  Director

  
						

 

 18Exhibit
10.2

NOTES SECURITY AGREEMENT

THIS NOTES SECURITY AGREEMENT (this “Agreement”),
dated as of April 2, 2007, made by each of the signatories hereto as Debtors
(together with any other entity that may become a party hereto as provided
herein, the “Debtors”), in favor of Wells Fargo Bank, N.A., as
collateral trustee (in such capacity, the “Collateral Trustee”) for the
benefit of the Secured Parties (as defined below).

WITNESSETH:

WHEREAS, Protection One Alarm Monitoring, Inc. (“POAMI”),
Protection One, Inc. (“Holdings”), the Subsidiary Guarantors (as defined
in the Indenture (defined below)) and Wells Fargo Bank, N.A., a national
banking association, as trustee (in such capacity, the “Trustee”) have
entered into an Indenture dated as of April 2, 2007 (as it may be amended,
amended and restated, supplemented or otherwise modified from time to time, the
“Indenture”), pursuant to which POAMI has authorized the issuance of its
12% Senior Secured Notes due 2011 (as such notes may hereafter be amended,
amended and restated, supplemented or otherwise modified from time to time, the
“Notes”);

WHEREAS, pursuant to the Indenture, each Debtor (other
than the Company) has unconditionally and irrevocably guaranteed, jointly and
severally, to each holder of the Notes (the “Holders”) and to the
Trustee and its successors and assigns the full and punctual payment and
performance of the Guaranteed Obligations (as defined in the Indenture);

WHEREAS, pursuant to the Indenture, each Debtor is
entering into this Agreement in order to grant to the Collateral Trustee for
the ratable benefit of the Holders, the Collateral Trustee and the Trustee
(collectively, the “Secured Parties”) a security interest in the
Collateral (as defined below); and

WHEREAS, the Notes will be issued in reliance on each
Debtor’s execution and delivery of this Agreement to the Collateral Trustee;

NOW, THEREFORE, in consideration of premises and
mutual covenants contained in the Indenture and for other good valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
each Debtor hereby agrees with the Collateral Trustee, for the benefit of the
Secured Parties, as follows:

1.             Definitions. When used
herein: (a) the terms Account, Account Debtor, Certificated Security, Chattel
Paper, Commercial Tort Claim, Deposit Account, Document, Electronic Chattel
Paper, Equipment, Financial Asset, Fixtures, General Intangibles, Goods,
Inventory, Instrument, Investment Property, Letter-of-Credit Rights, Money,
Payment Intangibles, Proceeds, Security, Security Entitlement, Supporting
Obligations and Uncertificated Security have the respective meanings assigned
thereto in the UCC (as defined below); (b) capitalized terms which are not
otherwise defined have the respective meanings assigned thereto in the
Indenture; and (c) the following terms have the following meanings (such
definitions to be applicable to both the singular and plural forms of such
terms):

Agent means Bear Stearns Corporate
Lending Inc. in its capacity as the “Agent” under the Credit Agreement,
together with any successors and permitted assigns.

Collateral shall have the meaning
assigned to such term in Section 2.

Computer Hardware means, with
respect to any Debtor, all of such Debtor’s rights (including rights as
licensee and lessee) with respect to computer and other electronic data
processing hardware, including all integrated computer systems, central
processing units, memory units, display terminals, printers, computer elements,
card readers, tape drives, hard and soft disk drives, cables, electrical supply
hardware, generators, power equalizers, accessories, peripheral devices and
other related computer hardware.

Computer Software means: (i) all
software programs designed for use on Computer Hardware, including all
operating system software, utilities and application programs in whatsoever
form (source code and object code in magnetic tape, disk or hard copy format or
any other listings whatsoever); (ii) any firmware associated with any of the
foregoing; and (iii) any documentation for Computer Hardware, and for software
and firmware described in clauses (i) and (ii) above, including flow charts,
logic diagrams, manuals, specifications, training materials, charts and pseudo
codes.

Copyright Licenses means any written
agreement naming the Company or any Guarantor as licensor or licensee granting
any right under any Copyright, including, without limitation, the grant of
rights to manufacture, distribute, exploit and sell materials derived from any
Copyright.

Credit Agreement means the Amended and Restated Credit Agreement dated
as of April 26, 2006, among Holdings, POAMI, the lenders party thereto, Bear,
Stearns & Co. Inc., as sole lead arranger and sole bookrunner, Bear Stearns
and Lehman Brothers Inc., as initial joint lead arrangers and initial joint
bookrunners, Lehman Commercial Paper Inc., as syndication agent, Harris Nesbitt
Financing, Inc., LaSalle Bank, N.A., and U.S. Bank National Association,
together as co-documentation agents, and Agent, as the same may be amended,
supplemented, amended and restated or otherwise modified from time to time.

Event of Default means the
occurrence of any Event of Default under Section 6.01 of the Indenture.

Excluded Assets means (i) the
collective reference to any property to the extent that and for as long as such
grant of a security interest (A) is prohibited by any Requirement of Law
(as defined in the Credit Agreement), (B) requires a filing with or
consent from any Governmental Authority (as defined in the Credit Agreement)
pursuant to any Requirement of Law that has not been made or obtained, or
(C) constitutes a breach or default under or results in the termination
of, or requires any consent not obtained under, any lease, license or
agreement, except to the extent that such Requirement of Law or provisions of
any such lease, license or agreement is ineffective under applicable law or
would be ineffective under Sections 9-406, 9-407, 9-408 or 9-409 of the New
York UCC to prevent the attachment of the security interest granted hereunder;
provided, that the security interest granted hereby (A) shall attach
at all times to all Proceeds of such property, (B) shall attach to such
property immediately and automatically (without need for any further grant or
act) at such time as the condition described in clause (i) ceases to
exist and 

 2
 

(C) to the extent
severable shall in any event attach to all rights in respect of such property
that are not subject to the condition described in clause (i) and (ii) any
Foreign Subsidiary Voting Stock excluded from the definition of “Pledged
Collateral” (each as defined in the Pledge Agreement).

Intangible Assets means any
contract, General Intangible, Copyright License, Patent License or Trademark
License.

Intellectual Property means all
past, present and future: (i) trade secrets and other proprietary information;
(ii) trademarks, service marks, business names, Internet domain names, designs,
logos, trade dress, slogans, indicia and other source and/or business
identifiers, and the goodwill of the business relating thereto and all
registrations or applications for registrations which have heretofore been or
may hereafter be issued thereon throughout the world; (iii) copyrights
(including copyrights for computer programs and software) and copyright
registrations or applications for registrations which have heretofore been or
may hereafter be issued throughout the world and all tangible property
embodying the copyrights; (iv) unpatented inventions (whether or not
patentable); (v) patent applications and patents; (vi) industrial designs,
industrial design applications and registered industrial designs; (vii) license
agreements related to any of the foregoing and income therefrom; (viii) books,
records, writings, computer tapes or disks, flow diagrams, specification
sheets, source codes, object codes and other physical manifestations,
embodiments or incorporations of any of the foregoing; (ix) the right to sue
for all past, present and future infringements of any of the foregoing; and (x)
all common law and other rights throughout the world in and to all of the
foregoing.

Loan Documents has the meaning
ascribed thereto in the Credit Agreement.

Organizational I.D. Number means, if
applicable with respect to any Debtor, the organizational identification number
assigned to such Debtor by the applicable governmental unit or agency of the
jurisdiction of organization for such Debtor.

Patent License means all agreements,
whether written or oral, providing for the grant by or to any Debtor of any
right to manufacture, use or sell any invention covered in whole or in part by
the Company.

Receivable means any right to a
monetary payment for goods which have been sold, leased, licensed, assigned or
otherwise disposed of, or for services which have been rendered, whether or not
such right is evidenced by an Instrument or Chattel Paper and whether or not it
has been earned by performance (including, without limitation, any Account).

Trademark License means any
agreement, whether written or oral, providing for the grant by or to any Debtor
of any right to use any Trademark.

Type of Organization means, with
respect to any Debtor, the legal nature (i.e., kind or type of entity) of such
Debtor (e.g., such as a corporation or limited liability company).

UCC means the Uniform Commercial
Code as in effect in the State of New York on the date of this Agreement, as
may be amended or modified from time to time; provided that, as used 

 3
 

in Section 7
hereof, “UCC” shall mean the Uniform Commercial Code as in effect from
time to time in any applicable jurisdiction.

2.             Grant of Security Interest.  As security for the payment of all Note
Obligations, each Debtor hereby grants to the Collateral Trustee for the
benefit of the Secured Parties a lien on and security interest in, and right of
set-off against, and acknowledges and agrees that the Collateral Trustee has
and shall continue to have for the benefit of the Secured Parties, a continuing
lien on and security interest in, and right of set-off against, all right,
title, and interest, whether now owned or existing or hereafter created,
acquired or arising, in and to all of the following property of such Debtor
(all being collectively referred to herein as the “Collateral”):

(a)           Accounts;

(b)           Certificated
Securities;

(c)           Chattel Paper,
including Electronic Chattel Paper;

(d)           Computer Hardware
and Computer Software and all rights with respect thereto, including any and
all licenses, options, warranties, service contracts, program services, test
rights, maintenance rights, support rights, improvement rights, renewal rights
and indemnifications, and any substitutions, replacements, additions or model
conversions of any of the foregoing;

(e)           Commercial Tort
Claims, as listed in Schedule 2(e) or in the notice to the Collateral Trustee
in the form of Attachment 1 to Schedule 2(e);

(f)            Deposit Accounts;

(g)           Documents;

(h)           Financial Assets;

(i)            General
Intangibles;

(j)            Goods (including
all of its Equipment, Fixtures and Inventory), and all embedded software,
accessions, additions, attachments, improvements, substitutions and
replacements thereto and therefor;

(k)           Instruments;

(l)            Intellectual
Property;

(m)          Investment Property;

(n)           Letter-of-Credit
Rights;

(o)           Money;

(p)           Security
Entitlements;

 4
 

(q)           Supporting
Obligations;

(r)            Uncertificated
Securities;

(s)           To the extent not included in the foregoing, all other personal
property of any kind or description;

(t)            Any of the above
property of such Debtor and any interest therein, of any kind or description
now held by the Collateral Trustee (or a bailee therefor) or at any time hereafter
transferred or delivered to, or coming into the possession, custody or control
of, the Collateral Trustee (or a bailee therefor), or any agent or affiliate of
the Collateral Trustee (or a bailee therefor), whether expressly as collateral
security or for any other purpose (whether for safekeeping, custody, collection
or otherwise), and all dividends and distributions on or other rights in
connection with any such property; and

(u)           All books, records,
writings, data bases, information and other property relating to, used or
useful in connection with, or evidencing, embodying, incorporating or referring
to any of the foregoing, and all Proceeds, products, offspring, rents, issues,
profits and returns of and from any of the foregoing.

Notwithstanding any other provision of this Agreement,
(a) the Collateral shall not include, and this Section 2 shall not grant any
security interest in, any property or asset to the extent that, and for so long
as, it constitutes an Excluded Asset and (b) in the event that Rule 3-10
or Rule 3-16 of Regulation S-X, promulgated pursuant to the
Securities Act, would require the filing with the Commission of separate
financial statements of any Subsidiary Guarantor due to such subsidiary’s
Capital Stock being pledged as Collateral for the Notes, such Capital Stock
shall be automatically deemed to not be part of the Collateral (but only to the
extent necessary to not be subject to such requirements), it being understood
that, upon any change to the assets of the Debtors or such Subsidiary
Guarantor, or any change in such rules that results in such separate financial
statements not being required to be filed, such Capital Stock (or any portion
thereof) shall be included as part of the Collateral, to the extent such
inclusion would not trigger such reporting requirement..

Each Debtor agrees to make all filings necessary, in a
form reasonably acceptable to the Collateral Trustee, and to take further
action that the Collateral Trustee may reasonably request in order to perfect
and continue the perfection of the security interests granted under this
agreement.

3.             Warranties.  Each Debtor, jointly and severally, warrants
that:  (a) no financing statement other
than any which is on file except as may have been filed on behalf of the
Collateral Trustee or in connection with Permitted Liens, or other instrument
similar in effect, covering all or any part of the Collateral is on file in any
public office; (b) such Debtor owns each item of the Collateral granted by it
hereunder, free of all Liens whatsoever, other than the security interest
hereunder and Permitted Liens,; (c) on the date hereof, such Debtor’s chief
executive office and principal place of business are as set forth on Schedule I
hereto and, except as set forth on Schedule I, such Debtor has not maintained
its chief executive office and principal place of business at any other
location at any time during the five years prior to the date of this 

 5
 

Agreement, and each other location where such Debtor
maintains a place of business is also set forth on Schedule I hereto;
(d) on the date hereof, such Debtor is the Type of Organization stated on Schedule
II hereto and is duly organized, validly existing and in good standing
under the laws of the state set forth on Schedule II hereto; (e) except
as set forth on Schedule III hereto, such Debtor is not now known and
during the five years preceding the date hereof has not previously been known
by any trade name; (f) on the date hereof, such Debtor’s true legal name as
registered in the jurisdiction in which such Debtor is organized or
incorporated, state of organization or incorporation, organizational
identification number as designated by the state of its incorporation or
organization, are as set forth on Schedule II hereto and, except as set
forth on Schedule III hereto, during the five years preceding the date
hereof, such Debtor has not been known by any different legal name and nor has
such Debtor been the subject of any merger or other corporate or partnership
reorganization as applicable; (g) Schedule IV hereto contains a complete
listing of all of such Debtor’s material Intellectual Property which is subject
to registration statutes on the date hereof; (h) Schedule V hereto
contains a complete listing as of the date hereof of all of each Debtor’s
Instruments, Investment Property, Letter-of-Credit Rights, Chattel Paper,
Documents, to the extent each has an individual value in excess of $50,000,
and, solely to the extent such involve claims in excess of $100,000
individually in damages, Commercial Tort Claims; (i) on the date hereof, all
Inventory and the Equipment in excess of $50,000 (other than mobile goods and
equipment out for repair) are kept at the locations listed on Schedule VI
(j) all information with respect to the Collateral and the Account Debtors set
forth in any schedule, certificate or other writing at any time heretofore or
hereafter furnished by such Debtor to the Collateral Trustee is and will be
true and correct in all material respects as of the date furnished; (k) as of the
date hereof such Debtor is a corporation, limited liability company or limited
partnership, as applicable, duly organized, validly existing and in good
standing under the laws of the state of its incorporation or organization; (l)
the execution and delivery of this Agreement and the performance by such Debtor
of its obligations hereunder are within such Debtor’s powers as a corporation,
limited liability company or limited partnership, as applicable, have been duly
authorized by all necessary corporate, limited liability company or limited
partnership action, as applicable, have received all necessary governmental
approval (if any shall be required), and do not and will not contravene or
conflict with any provision of law or of the organizational documents of such
Debtor or of any agreement, indenture, instrument or other document, or any
material judgment, order or decree, which is binding upon such Debtor; (m) this
Agreement is a legal, valid and binding obligation of such Debtor, enforceable
in accordance with its terms, except that the enforceability of this Agreement
may be limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent
transfer, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors’ rights generally and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity
or at law); and (n) such Debtor is in compliance with the requirements of all
applicable laws (including the provisions of the Fair Labor Standards Act),
rules, regulations and orders of every governmental authority, the
non-compliance with which would reasonably be expected to have a material
adverse effect on such Debtor’s ability to perform its obligations arising
hereunder.

Each
Debtor will take all reasonable and necessary steps, including in any
proceeding before the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other country or
group of countries or any political subdivision of any of the foregoing, to
maintain and pursue each application (and to obtain the relevant registration)
and to maintain each registration of its material Intellectual Property,
including 

 6
 

filing of applications for renewal, affidavits of use
and affidavits of incontestability.  In
the event that any material Intellectual Property is infringed, misappropriated
or diluted by a third party, such Debtor shall (i) take such actions as such
Debtor shall reasonably deem appropriate under the circumstances to protect
such Intellectual Property and (ii) if such Intellectual Property is of
material economic value, promptly notify the Collateral Trustee after it learns
thereof and sue for infringement, misappropriation or dilution, to seek
injunctive relief where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution.

4.             Collections, etc.  Until such time as the Collateral Trustee
shall notify any Debtor of the revocation of such power and authority as set
forth below, such Debtor may grant, in the ordinary course of business, to any
party obligated on any of the Collateral, any rebate, refund or allowance to
which such party may be lawfully entitled, and may accept, in connection
therewith, the return of Goods, the sale or lease of which shall have given
rise to such Collateral. Until such time during the existence of an Event of
Default as the Collateral Trustee shall notify any Debtor of the revocation of
such power and authority, such Debtor: (a) may, in the ordinary course of its
business, at its own expense, sell, lease or furnish under contracts of service
any of the Inventory normally held by such Debtor for such purpose, use and
consume in the ordinary course of its business, any raw materials, work in process
or materials normally held by such Debtor for such purpose, and use in the
ordinary course of its business (but subject to the terms of the Indenture),
the cash proceeds of the Collateral and other money which constitutes the
Collateral; and (b) will, at its own expense, use its best reasonable efforts
to collect, as and when due, all amounts due under any of the Collateral,
including the taking of such action with respect to such collection as the
Collateral Trustee may request or, in the absence of such request, as such
Debtor may deem advisable in accordance with good business practices.  The Collateral Trustee, however, may, at any
time that an Event of Default exists, whether before or after any revocation of
such power and authority or the maturity of any of the Note Obligations,
subject to the provisions set forth in the Intercreditor Agreement, notify an
Account Debtor or other Person obligated on the Collateral to make payment or
otherwise render performance to or for the benefit of the Collateral Trustee
(or a bailee therefor) and enforce, by suit or otherwise, the obligations of an
Account Debtor or other Person obligated on the Collateral and exercise the
rights of such Debtor with respect to the obligation of the Account Debtor or
other Person obligated on the Collateral to make payment or otherwise render
performance to the Debtor, and with respect to any property that secures the
obligations of the Account Debtor or other Person obligated on the Collateral.
In connection with the exercise of such rights and remedies, the Collateral
Trustee may surrender, release or exchange all or any part thereof, or
compromise or extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder or evidenced thereby. Subject to
the provisions of the Intercreditor Agreement, upon the request of the
Collateral Trustee during the existence of an Event of Default, each Debtor
will, at its own expense, immediately notify any or all parties obligated on
any of the Collateral to make payment to the Collateral Trustee of any amounts
due or to become due thereunder.

Subject to the provisions of the Intercreditor
Agreement, upon request by the Collateral Trustee during the existence and
continuation of an Event of Default, each Debtor will forthwith upon receipt,
transmit and deliver to the Collateral Trustee, in the form received, all cash,
checks, drafts and other instruments or writings for the payment of money
(properly endorsed, where required, so that such items may be collected by the
Collateral Trustee) which may be received by such Debtor at any time in full or
partial payment or otherwise as proceeds of any of the 

 7
 

Collateral. Except as the
Collateral Trustee may otherwise consent in writing, any such items which may be
so received by any Debtor will not be commingled with any other of its funds or
property, but will be held separate and apart from its own funds or property
and for the Collateral Trustee until delivery is made to the Collateral
Trustee. Each Debtor will comply with the terms and conditions of any consent
given by the Collateral Trustee pursuant to the foregoing sentence.

The Collateral Trustee (or any designee of the
Collateral Trustee or any bailee of the Collateral Trustee) is authorized to
endorse, in the name of the applicable Debtor, any item, howsoever received by
the Collateral Trustee, representing any payment on or other Proceeds of any of
the Collateral.

Subject to the provisions of the Intercreditor
Agreement, the Collateral Trustee agrees that it will not exercise any rights
under this Section 4 unless an Event of Default has occurred and is
continuing.

5.             Certificates, Schedules and
Reports. Each Debtor will from time to time, as the Collateral Trustee may
reasonably request, deliver to the Collateral Trustee (or a bailee therefor)
such schedules, certificates and reports respecting all or any of the
Collateral at the time subject to the security interest hereunder, and the
items or amounts received by such Debtor in full or partial payment of any of
the Collateral, as the Collateral Trustee may reasonably request. Any such
schedule, certificate or report shall be executed by an authorized officer of
such Debtor and shall be in such form and detail as the Collateral Trustee may
reasonably specify.

6.             Agreements of the Debtors.
Each Debtor: (a) hereby irrevocably authorizes the Collateral Trustee at any
time, and from time to time, to file in any jurisdiction, any initial financing
statements and amendments thereto that: 
(i) indicate the Collateral as all assets of such Debtor or words of
similar effect, regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9 of the UCC of the jurisdiction
wherein such financing statement or amendment is filed and (ii) contain any
other information required by Article 9 of the UCC of the jurisdiction wherein
such financing statement or amendment is filed regarding the sufficiency or
filing office acceptance of any financing statement or amendment, including (x)
whether such Debtor is an organization, the Type of Organization, the
Organization ID Number or Federal Employer Identification Number issued to such
Debtor and (y) in the case of a financing statement filed as a fixture filing
or indicating the Collateral to be extracted collateral, a sufficient
description of real property to which the Collateral relates; (b) except upon
15 days’ prior written notice to the Collateral Trustee shall keep all its
Inventory at, and will not maintain any place of business at, any location
other than its address(es) shown on Schedule I hereto (or any amendment
thereto); (c) shall keep its records concerning the Collateral in such a manner
as will enable the Collateral Trustee or its designees to readily determine at
any time the status of the Collateral; (d) furnish the Collateral Trustee such
information concerning such Debtor, the Collateral and the Account Debtors as
the Collateral Trustee may from time to time reasonably request; (e) shall
permit the Collateral Trustee and its designees, in accordance with the
provisions of the Indenture, to inspect such Debtor’s Inventory and other
Goods, and to inspect, audit and make copies of and extracts from all records
and other papers in the possession of such Debtor pertaining to the Collateral
and the Account Debtors, and shall, upon prior request of the Collateral
Trustee during the existence and continuation of an Event of Default, subject
to the provisions set forth in the Intercreditor Agreement, immediately deliver
to the 

 8
 

Collateral Trustee all of such records and papers; (f)
shall, if requested by the Agent to take similar action in respect of First
Lien Obligations (as defined in the Intercreditor Agreement), stamp on its
records concerning the Collateral, and add on all Chattel Paper and Instruments
constituting a portion of the Collateral, a notation, in form reasonably
satisfactory to the Collateral Trustee, of the security interest of the
Collateral Trustee hereunder; (g) except for the sale or lease of Inventory in
the ordinary course of its business or as permitted under this Agreement or the
Credit Agreement, sales of Equipment valued in excess of $50,000 which is no
longer used or useful in its business or which is being replaced by similar
Equipment or any other sale of the Collateral permitted under the Indenture,
shall not sell, lease, assign, create or permit to exist any Lien on any
Collateral, other than Permitted Liens; (h) shall take such actions as are
necessary to keep its Goods in good repair and condition (ordinary wear and
tear and casualty excepted); (i) shall take all such actions as are necessary
to keep its Equipment in good repair and condition and in good working order,
ordinary wear and tear excepted; (j) shall, except to the extent otherwise
permitted under the Indenture, promptly pay when due all license fees,
registration fees, taxes, assessments and other charges which may be levied
upon or assessed against the ownership, operation, possession, maintenance or
use of its Equipment and other Goods except as could not reasonably be expected
to cause a material adverse effect; (k) shall promptly notify the Collateral
Trustee in writing upon acquiring or otherwise obtaining any Collateral after
the date hereof consisting of Deposit Accounts, Investment Property,
Letter-of-Credit Rights or Electronic Chattel Paper with an individual value in
excess of $50,000 not listed on the Schedules hereto and, if requested by the
Agent to take similar action in respect of First Lien Obligations (as defined
in the Intercreditor Agreement), shall promptly execute such other documents,
and do such other acts or things deemed appropriate by the Collateral Trustee
to deliver to the Collateral Trustee (or a bailee therefor) control with
respect to such Collateral; (l) shall promptly notify the Collateral Trustee in
writing upon acquiring or otherwise obtaining any Collateral after the date
hereof consisting of Documents or Instruments each valued in excess of $50,000
and, if requested by the Agent to take similar action in respect of First Lien
Obligations (as defined in the Intercreditor Agreement) and subject to the
terms of the Intercreditor Agreement, shall promptly execute such other
documents, and do such other acts or things necessary to deliver to the
Collateral Trustee (or a bailee therefor) possession of such Documents which
are negotiable and Instruments, and, with respect to nonnegotiable Documents,
to have such nonnegotiable Documents issued in the name of the Collateral
Trustee (or a bailee therefor); (m) shall promptly notify the Collateral
Trustee in writing upon incurring or otherwise obtaining a Commercial Tort
Claim against any third party valued in excess of $100,000, and, if requested
by the Agent to take similar action in respect of First Lien Obligations (as defined
in the Intercreditor Agreement), shall promptly enter into an amendment to this
Agreement, and do such other acts or things deemed appropriate by the
Collateral Trustee, to give the Collateral Trustee a security interest in such
Commercial Tort Claim; (n) shall execute and deliver to the Collateral Trustee
(or a bailee therefor) such documents and take other action as reasonably
requested by the Collateral Trustee to insure the attachment, perfection and
second priority (or, after the Discharge of First Priority Claims (as defined
in the Intercreditor Agreement), first priority) of, and the ability of the
Collateral Trustee to enforce, free and clear of all Liens and claims and
rights of third parties whatsoever (except Permitted Liens), the security interests
in any and all of the Collateral including, without limitation, (i) complying
with any provision of any statute, regulation or treaty of the United States as
to any Collateral if compliance with such provision is a condition to
attachment, perfection or priority of, or ability of the Collateral 

 9
 

Trustee to enforce, the security interests in such
Collateral, (ii) obtaining governmental and other third party consents and
approvals, including, without limitation, any consent of any licensor, lessor or
other Person obligated on the Collateral and (iii) taking all actions required
by the UCC in effect from time to time or by other law, as applicable in any
relevant UCC jurisdiction, or by other law as applicable in any foreign
jurisdiction, (o) shall not change its state of incorporation or organization
or Type of Organization and will not change its legal name without providing
the Collateral Trustee with at least 15 days’ prior written notice; and (p)
shall pay and discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, all material taxes, assessments and
governmental charges or levies imposed upon the Collateral or in respect of
income or profits therefrom, as well as all claims of any kind (including,
without limitation, claims for labor, materials and supplies) against or with
respect to the Collateral except where the failure to do so could not be
reasonably expected to have a material adverse effect, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Debtor and
such proceedings could not reasonably expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.

In addition, each Debtor shall maintain, and cause
each of its Subsidiaries to maintain, insurance covering its properties and
assets against loss or damage by fire and against such other insurable hazards
as such assets are commonly insured (including fire, extended coverage,
property damage, workers’ compensation, public liability and business
interruption insurance) and against other risks (including errors and
omissions) in such amounts as similar properties and assets are insured by
prudent companies in similar circumstances carrying on similar businesses, and
with reputable insurers, including self-insurance to the extent customary. If
requested by the Agent to take similar action in respect of First Lien
Obligations (as defined in the Intercreditor Agreement), each Debtor shall
deliver to the Collateral Trustee (x) on the Closing Date and annually
thereafter an original certificate of insurance signed by such Debtor’s
independent insurance broker describing and certifying as to the existence of
the insurance on the Collateral required to be maintained by this Agreement and
the other Collateral Documents, and (y) from time to time upon the prior
request of the Collateral Trustee a summary schedule indicating all insurance
then in force with respect to such Debtor. Each Debtor shall deliver to the
Collateral Trustee copies of such policies of insurance containing special
endorsements (to the extent provided to the Agent in the cases of clauses
(iii), (iv), (v), (vi), (viii) and (ix)), which shall (i) specify the
Collateral Trustee as an additional insured, mortgagee and lender loss payee as
its interests may appear, with the understanding that any obligation imposed
upon the insured (including the liability to pay premiums) shall be the sole
obligation of the applicable Debtor and not that of the Collateral Trustee and
(ii) provide that no cancellation of such policies for any reason (including
non-payment of premium) nor any change therein shall be effective until at
least thirty (30) days (or ten (10) days in the case of non-payment of
premiums) after receipt by the Collateral Trustee of written notice of such
cancellation or change. The Company shall notify the Collateral Trustee of
receipt of (i) any written notice from the Agent of an “Event of Default” under
any of the Loan Documents or a written notice of demand for payment given to
any Debtor, and (ii) any written notice sent by the Agent to any Debtor stating
such party’s intention to exercise any material enforcement rights or remedies
against such Debtor, including written notice pertaining to any foreclosure on
all or any material part of the Collateral or other judicial 

 10
 

or non-judicial remedy in
respect thereof, and any legal process served or filed in connection therewith.

Any reasonable expenses incurred in protecting,
preserving or maintaining any Collateral shall be borne by the Debtors.
Whenever an Event of Default shall be existing, subject to the provisions set
forth in the Intercreditor Agreement, the Collateral Trustee shall have the
right to bring suit to enforce any or all of the Intellectual Property or
licenses thereunder, in which event the applicable Debtor shall, if requested
by the Agent to take similar action in respect of First Lien Obligations (as
defined in the Intercreditor Agreement), do any and all lawful acts and execute
any and all proper documents required by the Collateral Trustee in aid of such
enforcement, and such Debtor shall promptly, upon written demand, reimburse and
indemnify the Collateral Trustee for all reasonable out-of-pocket expenses
incurred by the Collateral Trustee in the exercise of its rights under this
Section 6. Notwithstanding the foregoing, subject to Section 10 hereof, the
Collateral Trustee shall have no obligation or liability regarding the
Collateral by reason of, or arising out of, this Agreement.

7.             Default and Remedies upon an
Event of Default.

(a)           If an Event of
Default shall have occurred and be continuing, the Collateral Trustee may,
subject to the provisions set forth in the Intercreditor Agreement, exercise
(or cause its sub-agents to exercise) any or all of the remedies available to
it under this Agreement.

(b)           Without limiting the
generality of the foregoing, if an Event of Default shall have occurred and be
continuing, the Collateral Trustee may, subject to the provisions set forth in
the Intercreditor Agreement, exercise, on behalf of the Secured Parties, all
the rights of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) with respect to any Collateral
and, in addition, the Collateral Trustee may, subject to the provisions set
forth in the Intercreditor Agreement, sell, lease, license or otherwise dispose
of the Collateral or any part thereof. Any required notice of any such sale or
other disposition shall be given to the relevant Debtors as required in Section
10 hereof.

8.             Application of Proceeds.

  At such
intervals as may be agreed upon by the Company and the Collateral Trustee, or,
if an Event of Default shall have occurred and be continuing, at any time at
the Collateral Trustee’s election, the Collateral Trustee shall apply all or
any part of Proceeds constituting the Collateral, whether or not held in any
Collateral Account, in payment of the Note Obligations in the order of
application provided for in accordance with the provisions of the Indenture,
subject to the Intercreditor Agreement.

9.             Authority to Administer
Collateral.  Subject to the terms of
the Intercreditor Agreement, each Debtor irrevocably appoints the Collateral
Trustee its true and lawful attorney with full power of substitution, in the
name of such Debtor, for the sole use and benefit of the Secured Parties, but
at Debtors’ expense, to the extent permitted by law, to exercise, at any time
and from time to time while an Event of Default shall have occurred and be
continuing, subject 

 11
 

to the provisions set forth in the Intercreditor
Agreement, all or any of the following powers with respect to all or any of
such Debtor’s Collateral:

(a)           to demand, sue for,
collect, receive and give acquittance for any and all monies due or to become
due upon or by virtue thereof;

(b)           to settle,
compromise, compound, prosecute or defend any action or proceeding with respect
thereto;

(c)           to sell, lease,
license or otherwise dispose of the same or the Proceeds thereof, as fully and
effectually as if the Collateral Trustee were the absolute owner thereof, and

(d)           to extend the time of
payment of any or all thereof and to make any allowance or other adjustment
with reference thereto;

provided that, except in the case of
Collateral that is perishable or threatens to decline speedily in value or is
of a type customarily sold on a recognized market, the Collateral Trustee will
give the relevant Debtor ten days’ prior written notice of the time and place
of any public sale thereof or the time after which any private sale or other
intended disposition thereof will be made, and such Debtor hereby agrees that
such notice shall be deemed reasonable.

10.           Limitation on Duty in Respect of
Collateral. Beyond the exercise of reasonable care in the custody and
preservation thereof, the Collateral Trustee will have no duty as to any
Collateral in its possession or control or in the possession or control of any
sub-agent or bailee or any income therefrom or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Collateral
Trustee will be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession or control if such Collateral
is accorded treatment substantially equal to that which it accords its own
property, and will not be liable or responsible for any loss or damage to any
Collateral, or for any diminution in the value thereof, by reason of any act or
omission of any sub-agent or bailee selected by the Collateral Trustee in good
faith or by reason of any act or omission by the Collateral Trustee, except to
the extent that such liability arises from the Collateral Trustee’s gross
negligence or willful misconduct.

To the extent that applicable law imposes duties on
the Collateral Trustee to exercise remedies in a commercially reasonable
manner, each Debtor acknowledges and agrees that it is not commercially
unreasonable for the Collateral Trustee: (a) to fail to incur expenses deemed
significant by the Collateral Trustee to prepare Collateral for disposition or
otherwise to complete raw material or work-in-process into finished goods or
other finished products for disposition, (b) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain governmental or third party consents
for the collection or disposition of Collateral to be collected or disposed of,
(c) to fail to exercise collection remedies against Account Debtors or other
Persons obligated on Collateral or to remove Liens on or any adverse claims
against Collateral, (d) to exercise collection remedies against Account Debtors
and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general
circulation, whether or not Collateral is of a specialized 

 12
 

nature, (f) to contact
other Persons, whether or not in the same business as such Debtor, for
expressions of interest in acquiring all or any portion of Collateral, (g) to
hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the collateral is of a specialized nature, (h) to
dispose of Collateral by utilizing Internet sites that provide for the auction
of assets of the types included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets, (i) to
dispose of assets in wholesale rather than retail markets, (j) to disclaim
disposition warranties, including, without limitation, any warranties of title,
(k) to purchase insurance or credit enhancements to insure the Collateral
Trustee against risks of loss, collection or disposition of Collateral, or to
provide to the Collateral Trustee a guaranteed return from the collection or
disposition of Collateral, or (l) to the extent deemed appropriate by the
Collateral Trustee, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist the Collateral Trustee
in the collection or disposition of any of Collateral. Each Debtor acknowledges
that the purpose of this Section 10 is to provide non-exhaustive indications of
what actions or omissions by the Collateral Trustee would not be commercially
unreasonable in the Collateral Trustee’s exercise of remedies against
Collateral and that other actions or omissions by the Collateral Trustee shall
not be deemed commercially unreasonable solely on account of not being
indicated in this Section 10. Without limitation upon the foregoing, nothing
contained in this Section 10 shall be construed to grant any right to any
Debtor or to impose any duties on the Collateral Trustee that would not have
been granted or imposed by this Agreement or by applicable law in the absence
of this Section 10.

11.           General.

(a)           All notices, requests,
demands, directions and other communications (as used in this Section 11,
collectively referred to as “notices”) given to or made upon any party hereto
under the provisions of this Agreement shall be in writing (including facsimile
communication) unless otherwise expressly permitted hereunder and shall be
delivered or sent by facsimile or via nationally-recognized overnight courier,
by hand or U.S. mail to the respective parties at the addresses and numbers set
forth under their respective names on Schedule I hereof (for the
Debtors), at the address set forth in the Indenture (for the Collateral
Trustee) or in accordance with any subsequent unrevoked written direction from
any party to the others delivered pursuant to the requirements of this Section
11(a). All notices shall, except as otherwise expressly herein provided, be
effective: (a) in the case of facsimile, when received, (b) in the case of
hand-delivered notice, when hand-delivered, (c) in the case of telephonic
notice, when telephoned, provided however, that in order to be
effective, telephonic notices must be confirmed in writing no later than the
next Business Day by letter or facsimile, (d) if given by mail, four days after
such communication is deposited in the mail with first-class postage prepaid,
return receipt requested, and (d) if given by any other means (including by air
courier), when delivered; provided, that any notices to the Collateral Trustee
shall not be effective until received.

(b)           Each of the Debtors
agrees to pay all reasonable out-of-pocket expenses, including reasonable
attorney’s fees and charges (but not including time charges of attorneys who
are employees of the Collateral Trustee) paid or incurred by the Collateral
Trustee in endeavoring to collect the Note Obligations of such Debtor, or any
part thereof, and in enforcing this Agreement against such Debtor, and such
obligations will themselves be Note Obligations.

 13
 

(c)           No delay on the part
of the Collateral Trustee in the exercise of any right or remedy shall operate
as a waiver thereof, and no single or partial exercise by the Collateral
Trustee of any right or remedy shall preclude other or further exercise thereof
or the exercise of any other right or remedy.

(d)           This Agreement shall
remain in full force and effect until all Note Obligations (other than
contingent indemnification obligations not yet due and payable) have been paid
in full. If at any time all or any part of any payment theretofor applied by
the Collateral Trustee to any of the Note Obligations is or must be rescinded
or returned by the Secured Parties for any reason whatsoever (including the
insolvency, bankruptcy or reorganization of any Debtor), such Note Obligations
shall, for the purposes of this Agreement, to the extent that such payment is
or must be rescinded or returned, be deemed to have continued in existence,
notwithstanding such application by the Collateral Trustee, and this Agreement
shall continue to be effective or be reinstated, as the case may be, as to such
Note Obligations, all as though such application by the Collateral Trustee had
not been made.

(e)           This Agreement shall
be construed in accordance with and governed by the laws of the State of New
York applicable to contracts made and to be performed entirely within such
State. Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.

(f)            The rights and
privileges of the Collateral Trustee hereunder shall inure to the benefit of its
successors and permitted assigns.

(g)           This Agreement may
be executed in any number of counterparts and by the different parties hereto
on separate counterparts, and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
Agreement. Each Subsidiary of the Company that is required to become a party to
this Agreement pursuant to the Indenture shall become a Debtor for all purposes
of this Agreement upon execution and delivery to the Collateral Trustee by such
Subsidiary of a counterpart of this Agreement together with supplements to the
Schedules hereto setting forth all relevant information with respect to such
party as of the date of such delivery. Immediately upon such execution and delivery
(and without any further action), each such Subsidiary will become a party to,
and will be bound by all the terms of, this Agreement.

(h)           ANY LEGAL SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (“RELATED PROCEEDINGS”) MAY BE INSTITUTED IN
THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE CITY OF NEW
YORK, BOROUGH OF MANHATTAN, OR THE COURTS OF THE STATE OF NEW YORK IN EACH CASE
LOCATED IN THE CITY OF NEW YORK (COLLECTIVELY, THE “SPECIFIED COURTS”), AND
EACH PARTY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS
IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF ANY PROCESS, SUMMONS, NOTICE
OR DOCUMENT BY 

 14
 

MAIL (TO THE
EXTENT ALLOWED UNDER ANY APPLICABLE STATUTE OR RULE OF COURT) TO SUCH PARTY’S
ADDRESS SET FORTH ABOVE SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT,
ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY
AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT,
ACTION OR OTHER PROCEEDING IN THE SPECIFIED COURTS AND IRREVOCABLY AND
UNCONDITIONALLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.

(i)            Each Debtor hereby
acknowledges that:

(a)           it
has been advised by counsel in the negotiation, execution and delivery of this
Agreement, the other Collateral Documents, the Indenture and the Notes;

(b)                                 neither
the Collateral Trustee nor any Secured Party has any fiduciary relationship
with or duty to any Debtor arising out of or in connection with this Agreement,
the other Collateral Documents, the Indenture or Notes, and the relationship
between the Debtors, on the one hand, and the Collateral Trustee and the
Secured Parties, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor.

(j)            This Agreement, the
other Collateral Documents, the Indenture and the Notes represent the agreement
of the Debtors, the Collateral Trustee and the Secured Parties with respect to
the subject matter hereof and thereof, and there are no promises, undertakings,
representations or warranties by the Collateral Trustee or any Secured Party
relative to subject matter hereof and thereof not expressly set forth or
referred to herein, in the Indenture or in the Notes.

(k)           None of the terms or
provisions of this Agreement may be waived, amended, supplemented or otherwise
modified except in accordance with the Indenture and the Intercreditor
Agreement.

(l)            If either (i) the
Notes Guarantee is released as to any Debtor pursuant to the Indenture or (ii)
at such time as the Note Obligations (other than contingent indemnification
obligations) have been paid in full, the Collateral of such Debtor shall be
released from the Liens created hereby, and this Agreement and all obligations
(other than those expressly stated to survive such termination) of such Debtor
hereunder shall terminate, all without delivery of any instrument or
performance of any act by any party (other than as set forth in the Indenture),
and all rights to such Collateral shall revert to such Debtor, and the
Collateral Trustee, at the request and sole expense of such Debtor, shall
execute and deliver to such Debtor all releases or other documents reasonably
requested by such Debtor or its designee for the release of the Liens created
hereby on such Collateral.

(m)          In connection with
its appointment and acting hereunder, the Collateral Trustee is entitled to all
rights, privileges, protections, immunities, benefits and indemnities provided
to the Collateral Trustee under the Indenture. All such indemnities shall
survive the 

 15
 

termination of
this Agreement or the Indenture, and the resignation or removal of the
Collateral Trustee.

(n)           Notwithstanding
anything herein to the contrary, the lien and security interest granted to the
Collateral Trustee pursuant to this Agreement and the exercise of any right or
remedy by the Collateral Trustee hereunder are subject to the provisions of the
Intercreditor Agreement. 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.

[SIGNATURE PAGES FOLLOW]

 

 16

IN WITNESS WHEREOF, this Agreement has been duly
executed as of the day and year first above written.

	
  

  	
  DEBTORS:

  
	
   

  	
   

  	
   

  
	
   

  	
  PROTECTION ONE, INC.

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PROTECTION ONE ALARM

  MONITORING, INC.

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NETWORK MULTIFAMILY

  SECURITY CORPORATION

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SECURITY MONITORING SERVICES, INC.

  a Florida corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  PROTECTION ONE ALARM

  MONITORING OF MASS, INC.

  
	
   

  	
  a Massachusetts corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
	
   

  	
   

  	
   

  
				

 

 

	
  

  	
  PROTECTION ONE SYSTEMS, INC.

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
				

 

Remainder
of page intentionally left blank

 2
 

 

	
  

  	
  INTEGRATED ALARM SERVICES

  GROUP, INC.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INTEGRATED ALARM SERVICES, INC.,

  a Delaware Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AMERICAN HOME

  SECURITY, INC.,

  a Nevada Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
				

 

Remainder
of page intentionally left blank

 3
 

 

	
  

  	
  CRITICOM INTERNATIONAL

  CORPORATION,

  a New Jersey Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MONITAL SIGNAL CORPORATION,

  a New Jersey Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EVEREST VIDEO SYSTEMS, L.L.C.,

  a Delaware Limited Liability Company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NATIONAL ALARM COMPUTER

  CENTER INC.,

  a Delaware Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
  Name:

  	
  J. Eric Griffin

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
	
   

  	
   

  	
   

  
				

 

 4
 

 

	
  

  	
  WELLS FARGO BANK, N.A.,
  as 

  Collateral Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph P. O’Donnell

  
	
   

  	
  Name:

  	
  Joseph P. O’Donnell

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
				

 

Signature Page to
Notes Security Agreement

 

 5

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