Document:

Exhibit 4.6(ii)

 

 

LOAN AND SECURITY AGREEMENT

 

Dated as of August 17, 2004

 

$275,000,000

 

by and among

 

NES Rentals Holdings, Inc.,

as Borrower

 

The Subsidiaries of NES Rentals Holdings,
Inc. From Time to Time Party Hereto,

as Subsidiary Guarantors

 

The Financial Institutions From Time to Time
Party Hereto,

as Lenders

 

Bear, Stearns & Co. Inc.,

as Syndication Agent

 

and

 

Bank of America, N.A.,

as Administrative Agent

 

 

Banc of America Securities LLC and Bear,
Stearns & Co. Inc.,

as Joint Lead Arrangers and Joint Book Managers

 

 

TABLE OF CONTENTS

 

	
  SECTION 1.   CREDIT FACILITY

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Loans

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.   INTEREST, FEES
  AND CHARGES

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Interest.

  	
   

  
	
   

  	
  2.2

  	
  Computation of Interest and Fees

  	
   

  
	
   

  	
  2.3

  	
  Fee
  Letter

  	
   

  
	
   

  	
  2.4

  	
  [Intentionally Omitted].

  	
   

  
	
   

  	
  2.5

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
  2.6

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
  2.7

  	
  Reimbursement of Expenses

  	
   

  
	
   

  	
  2.8

  	
  Bank
  Charges

  	
   

  
	
   

  	
  2.9

  	
  Collateral Protection Expenses; Appraisals

  	
   

  
	
   

  	
  2.10

  	
  Payment of Charges

  	
   

  
	
   

  	
  2.11

  	
  No Deductions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.   LOAN
  ADMINISTRATION

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Manner of Borrowing/LIBOR Option

  	
   

  
	
   

  	
  3.2

  	
  Payments

  	
   

  
	
   

  	
  3.3

  	
  Mandatory and Optional Prepayments

  	
   

  
	
   

  	
  3.4

  	
  Application of Payments and Collections

  	
   

  
	
   

  	
  3.5

  	
  All Term Loans to Constitute One Obligation

  	
   

  
	
   

  	
  3.6

  	
  Loan
  Account

  	
   

  
	
   

  	
  3.7

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
  3.8

  	
  Increased Costs

  	
   

  
	
   

  	
  3.9

  	
  Basis for Determining Interest Rate
  Inadequate

  	
   

  
	
   

  	
  3.10

  	
  Sharing
  of Payments, Etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.   TERM AND
  TERMINATION

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Term of Agreement

  	
   

  
	
   

  	
  4.2

  	
  Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.   SECURITY
  INTERESTS

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Security Interest in Collateral

  	
   

  
	
   

  	
  5.2

  	
  Other Collateral.

  	
   

  
	
   

  	
  5.3

  	
  Lien Perfection; Further Assurances

  	
   

  
	
   

  	
  5.4

  	
  Lien on Realty

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.   COLLATERAL
  ADMINISTRATION

  	
   

  	
   

  
	
   

  	
  6.1

  	
  General

  	
   

  
	
   

  	
  6.2

  	
  Administration of Accounts

  	
   

  
	
   

  	
  6.3

  	
  Administration of Inventory

  	
   

  
	
   

  	
  6.4

  	
  Payment of Charges

  	
   

  
					

 

i

 

	
  SECTION 7.   REPRESENTATIONS
  AND WARRANTIES

  	
   

  	
   

  
	
   

  	
  7.1

  	
  General Representations and Warranties

  	
   

  
	
   

  	
  7.1.1

  	
  Qualification

  	
   

  
	
   

  	
  7.1.2

  	
  Power and Authority

  	
   

  
	
   

  	
  7.1.3

  	
  Legally Enforceable Agreement

  	
   

  
	
   

  	
  7.1.4

  	
  Capital Structure

  	
   

  
	
   

  	
  7.1.5

  	
  Names; Organization

  	
   

  
	
   

  	
  7.1.6

  	
  Business Locations; Administrative Agent
  for Process

  	
   

  
	
   

  	
  7.1.7

  	
  Title to Properties; Priority of Liens.

  	
   

  
	
   

  	
  7.1.8

  	
  Accounts.

  	
   

  
	
   

  	
  7.1.9

  	
  Nonrental Equipment and Rental Equipment
  Inventory

  	
   

  
	
   

  	
  7.1.10

  	
  Financial Statements; Fiscal Year

  	
   

  
	
   

  	
  7.1.11

  	
  Full Disclosure

  	
   

  
	
   

  	
  7.1.12

  	
  Solvent Financial Condition

  	
   

  
	
   

  	
  7.1.13

  	
  Surety Obligations

  	
   

  
	
   

  	
  7.1.14

  	
  Taxes

  	
   

  
	
   

  	
  7.1.15

  	
  Brokers

  	
   

  
	
   

  	
  7.1.16

  	
  Patents, Trademarks, Copyrights and
  Licenses

  	
   

  
	
   

  	
  7.1.17

  	
  Governmental Consents

  	
   

  
	
   

  	
  7.1.18

  	
  Compliance with Laws

  	
   

  
	
   

  	
  7.1.19

  	
  Restrictions

  	
   

  
	
   

  	
  7.1.20

  	
  Litigation

  	
   

  
	
   

  	
  7.1.21

  	
  No Defaults

  	
   

  
	
   

  	
  7.1.22

  	
  Distributions

  	
   

  
	
   

  	
  7.1.23

  	
  ERISA Compliance

  	
   

  
	
   

  	
  7.1.24

  	
  Trade Relations

  	
   

  
	
   

  	
  7.1.25

  	
  Labor Relations

  	
   

  
	
   

  	
  7.1.26

  	
  Related Businesses

  	
   

  
	
   

  	
  7.1.27

  	
  Margin Regulations

  	
   

  
	
   

  	
  7.1.28

  	
  Regulated Entities

  	
   

  
	
   

  	
  7.1.29

  	
  Environmental Laws

  	
   

  
	
   

  	
  7.1.30

  	
  Motor Vehicles

  	
   

  
	
   

  	
  7.1.31

  	
  Anti-Terrorism Laws

  	
   

  
	
   

  	
  7.1.32

  	
  Deposit and Brokerage Accounts

  	
   

  
	
   

  	
  7.2

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
  7.3

  	
  Survival of Representations and Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.   COVENANTS AND
  CONTINUING AGREEMENTS

  	
   

  
	
   

  	
  8.1

  	
  Affirmative Covenants

  	
   

  
	
   

  	
  8.1.1

  	
  Visits and Inspections; Appraisals of
  Rental Equipment Inventory; Lender Meeting

  	
   

  
	
   

  	
  8.1.2

  	
  Notices

  	
   

  
	
   

  	
  8.1.3

  	
  Financial Statements and Financial
  Information.

  	
   

  
	
   

  	
  8.1.4

  	
  Collateral Coverage Certificates

  	
   

  
	
   

  	
  8.1.5

  	
  Landlord,
  Processor and Storage Agreements

  	
   

  
	
   

  	
  8.1.6

  	
  Projections

  	
   

  
	
   

  	
  8.1.7

  	
  Additional Credit Parties

  	
   

  
								

 

ii

 

	
   

  	
  8.1.8

  	
  ERISA

  	
   

  
	
   

  	
  8.1.9

  	
  Environmental Laws

  	
   

  
	
   

  	
  8.2

  	
  Negative Covenants

  	
   

  
	
   

  	
  8.2.1

  	
  Mergers;
  Consolidations; Acquisitions; Structural Changes

  	
   

  
	
   

  	
  8.2.2

  	
  Loans

  	
   

  
	
   

  	
  8.2.4

  	
  Affiliate Transactions

  	
   

  
	
   

  	
  8.2.5

  	
  Limitation on Liens

  	
   

  
	
   

  	
  8.2.6

  	
  Payments and Amendments of Certain Debt

  	
   

  
	
   

  	
  8.2.7

  	
  Distributions

  	
   

  
	
   

  	
  8.2.8

  	
  Disposition of Assets

  	
   

  
	
   

  	
  8.2.9

  	
  Issuance of Securities

  	
   

  
	
   

  	
  8.2.10

  	
  Bill-and-Hold Sales, Etc.

  	
   

  
	
   

  	
  8.2.11

  	
  Restricted Investment

  	
   

  
	
   

  	
  8.2.12

  	
  Subsidiaries and Joint Ventures

  	
   

  
	
   

  	
  8.2.13

  	
  Tax Consolidation

  	
   

  
	
   

  	
  8.2.14

  	
  Organizational Documents

  	
   

  
	
   

  	
  8.2.15

  	
  Fiscal Year End

  	
   

  
	
   

  	
  8.2.16

  	
  Negative Pledges

  	
   

  
	
   

  	
  8.2.17

  	
  Leases

  	
   

  
	
   

  	
  8.2.18

  	
  Anti-Terrorism Laws

  	
   

  
	
   

  	
  8.2.19

  	
  Change in Nature of Business

  	
   

  
	
   

  	
  8.2.20

  	
  Location of Personal Property

  	
   

  
	
   

  	
  8.3

  	
  Specific Financial Covenants.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.  
  CONDITIONS PRECEDENT

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Conditions to Term Loans

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.  
  EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT

  	
   

  
	
   

  	
  10.1

  	
  Events of Default

  	
   

  
	
   

  	
  10.2

  	
  Acceleration of the Obligations

  	
   

  
	
   

  	
  10.3

  	
  Other Remedies

  	
   

  
	
   

  	
  10.4

  	
  Setoff and Sharing of Payments

  	
   

  
	
   

  	
  10.5

  	
  Remedies Cumulative; No Waiver

  	
   

  
	
   

  	
   

  
	
  SECTION 11.   ADMINISTRATIVE
  AGENT

  	
   

  
	
   

  	
  11.1

  	
  Authorization and Action

  	
   

  
	
   

  	
  11.2

  	
  Administrative Agent’s and
  Syndication Agent’s Reliance, Etc.

  	
   

  
	
   

  	
  11.3

  	
  BofA and Affiliates

  	
   

  
	
   

  	
  11.4

  	
  Lender Credit Decision

  	
   

  
	
   

  	
  11.5

  	
  Indemnification

  	
   

  
	
   

  	
  11.6

  	
  Rights and Remedies to Be Exercised by Administrative Agent Only

  	
   

  
	
   

  	
  11.7

  	
  Agency Provisions Relating to Collateral

  	
   

  
	
   

  	
  11.8

  	
  Right to Assign Commitments of
  Non-Consenting Lenders

  	
   

  
	
   

  	
  11.9

  	
  Right
  of Sale, Assignment, Participations

  	
   

  
	
   

  	
  11.10

  	
  Amendment

  	
   

  
	
   

  	
  11.11

  	
  Resignation of Administrative Agent;
  Appointment of Successor

  	
   

  
	
   

  	
  11.12

  	
  Audit and Examination Reports; Disclaimer
  by Lenders

  	
   

  
								

 

iii

 

	
   

  	
  11.13

  	
  Syndication Agent

  	
   

  
	
   

  	
  11.14

  	
  No Reliance on Administrative Agent’s Customer Identification Program

  	
   

  
	
   

  	
  11.15

  	
  USA Patriot Act

  	
   

  
	
   

  	
  11.16

  	
  Withholding

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.   GUARANTY

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Guaranty

  	
   

  
	
   

  	
  12.2

  	
  Rights of Reimbursement, Contribution and Subrogation

  	
   

  
	
   

  	
  12.3

  	
  Amendments,
  etc. with respect to the Obligations

  	
   

  
	
   

  	
  12.4

  	
  Guaranty Absolute and Unconditional

  	
   

  
	
   

  	
  12.5

  	
  Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 13.   MISCELLANEOUS

  	
   

  	
   

  
	
   

  	
  13.1

  	
  Power of Attorney

  	
   

  
	
   

  	
  13.2

  	
  Indemnity

  	
   

  
	
   

  	
  13.3

  	
  Severability

  	
   

  
	
   

  	
  13.4

  	
  Successors and Assigns

  	
   

  
	
   

  	
  13.5

  	
  Cumulative Effect; Conflict of Terms

  	
   

  
	
   

  	
  13.6

  	
  Execution in Counterparts

  	
   

  
	
   

  	
  13.7

  	
  Notice

  	
   

  
	
   

  	
  13.8

  	
  Consent

  	
   

  
	
   

  	
  13.9

  	
  Credit Inquiries

  	
   

  
	
   

  	
  13.10

  	
  Time of Essence

  	
   

  
	
   

  	
  13.11

  	
  Entire Agreement

  	
   

  
	
   

  	
  13.12

  	
  Interpretation

  	
   

  
	
   

  	
  13.13

  	
  Confidentiality

  	
   

  
	
   

  	
  13.14

  	
  GOVERNING LAW; CONSENT TO FORUM

  	
   

  
	
   

  	
  13.15

  	
  WAIVERS BY CREDIT PARTIES

  	
   

  
	
   

  	
  13.16

  	
  Advertisement

  	
   

  
	
   

  	
  13.17

  	
  References to Intercreditor Agreement

  	
   

  
	
   

  	
  13.18

  	
  Recovery

  	
   

  
					

 

iv

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT is
made as of this 17th day of August, 2004 by and among BANK OF AMERICA, N.A. (“BofA”), a national banking association, as
administrative agent (“Administrative Agent”)
for any financial institution or other entity which is or becomes a party
hereto (each such financial institution or other entity is referred to
hereinafter individually as a “Lender” and
collectively as the “Lenders”),
the LENDERS party hereto from time
to time, BEAR, STEARNS & CO. INC.,
as syndication agent (“Syndication Agent”),
NES RENTALS HOLDINGS, INC., a
Delaware corporation (“Borrower”),
and each subsidiary of Borrower which is or becomes a party hereto (each
individually a “Subsidiary Guarantor”
and collectively “Subsidiary Guarantors”).  Capitalized terms used in this Agreement have
the meanings assigned to them in Appendix A, General Definitions.  As more fully set forth in Appendix A,
accounting terms not otherwise specifically defined herein shall be construed
in accordance with GAAP consistently applied.

 

SECTION 1.  CREDIT FACILITY

 

Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders agree to make a Total Credit Facility of up to $275,000,000
available upon Borrower’s request therefor, as follows:

 

1.1              Loans.

 

1.1.1                        Term Loan. 
Each Lender, severally and not jointly, agrees to make a term loan
(collectively, the “Term Loans”)
to Borrower on the Closing Date, in the aggregate principal amount of such
Lender’s Term Loan Commitment, which shall be repayable in accordance with the
terms hereof and of the Term Notes and shall be secured by all of the
Collateral.

 

1.1.2                        Use of Proceeds. 
The proceeds of Term Loans shall be used solely for (i) the satisfaction
of the Prior Indebtedness and fees and expenses related to such satisfaction
and (ii) for Borrower’s and the Subsidiary Guarantors’ general corporate
purposes, including, without limitation, operating capital needs in a manner
consistent with the provisions of this Agreement and all applicable laws.

 

SECTION 2.  INTEREST, FEES
AND CHARGES

 

2.1              Interest.

 

2.1.1                        Rates of Interest. 
Interest shall accrue on the principal amount of the Base Rate Portions
outstanding at the end of each day at a fluctuating rate per annum equal to the
Applicable Margin then in effect plus the Base Rate.  Said rate of interest shall increase or
decrease by an amount equal to any increase or decrease in the Base Rate,
effective as of the opening of business on the day that any such change in the
Base Rate occurs.  If Borrower exercises
the LIBOR Option as provided in subsection 3.1, interest shall
accrue on the principal amount of the LIBOR Portions outstanding at the

 

 

end of each day at a
rate per annum equal to the Applicable Margin then in effect plus the
LIBOR applicable to each LIBOR Portion for the corresponding Interest Period.

 

2.1.2                        Default Rate of Interest. 
If so directed by the Majority Lenders, upon and after the occurrence of
an Event of Default, and during the continuation thereof upon notice to
Borrower, all of the Obligations shall bear interest at a rate per annum equal
to 2.0% plus the interest rate otherwise applicable thereto (the “Default Rate”); provided, that (i)
the Default Rate of interest shall apply to all of the Obligations
automatically without notice to Borrower or any other Person and without
further action by any Person upon the occurrence of an Event of Default as
described in subsection 10.1.6 and (ii) in the event no applicable
interest rate is otherwise expressly stated herein with respect to any such
Obligation, the Default Rate in respect thereof shall be the sum of the Base
Rate, plus the Applicable Margin then in effect for Base Rate Portions, plus
2.0%.

 

2.1.3                        Maximum Interest. 
In no event whatsoever shall the aggregate of all amounts deemed
interest hereunder or under the Term Notes and charged or collected pursuant to
the terms of this Agreement or pursuant to the Term Notes exceed the highest
rate permissible under any law which a court of competent jurisdiction shall,
in a final determination, deem applicable hereto (the “Maximum Rate”).  If any provisions of this Agreement or the
Term Notes are in contravention of any such law, such provisions shall be
deemed amended to conform thereto.  If at
any time, the amount of interest paid hereunder is limited by the Maximum Rate,
and the amount at which interest accrues hereunder is subsequently below the
Maximum Rate, the rate at which interest accrues hereunder shall remain at the
Maximum Rate, until such time as the aggregate interest paid hereunder equals
the amount of interest that would have been paid had the Maximum Rate not
applied.

 

2.2              Computation of Interest and Fees. 
Interest hereunder shall be calculated daily and shall be computed on
the actual number of days elapsed over a year of 360 days, provided that
interest on Base Rate Portions bearing interest based on the Prime Rate shall
be computed on the actual number of days elapsed over a year of 365 or 366
days, as applicable.

 

2.3              Fee
Letter. 
Borrower shall pay to Administrative Agent certain fees and other
amounts in accordance with the terms of the fee letter between Borrower and
Administrative Agent, dated August 17, 2004, as amended, restated or
otherwise modified from time to time (the “Fee
Letter”).

 

2.4              [Intentionally Omitted].

 

2.5              [Intentionally Omitted].

 

2.6              [Intentionally Omitted].

 

2.7              Reimbursement of Expenses.  If, at any
time or times regardless of whether or not an Event of Default then exists,
(i) Administrative Agent or the Joint Lead Arrangers incur reasonable
legal or accounting expenses or any other reasonable costs or out-of-

 

2

 

pocket
expenses in connection with the negotiation and preparation of this Agreement
or any of the other Loan Documents, or any syndication or attempted syndication
of the Obligations (including, without limitation, printing and distribution of
materials to prospective Lenders and all costs associated with bank meetings,
but excluding any closing fees paid to Lenders in connection therewith); or
(ii) Administrative Agent incurs reasonable legal or accounting expenses or any
other reasonable costs or out-of-pocket expenses in connection with any (1)
amendment of or modification of this Agreement or any of the other Loan
Documents, the administration of this Agreement or any of the other Loan
Documents and the transactions contemplated hereby and thereby; or (2) any
attempt to inspect or verify the Collateral; or (iii) Administrative Agent
incurs legal or accounting expenses or other costs or out-of-pocket expenses in
connection with (1) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Administrative Agent, any Lender, Borrower, any
of its Subsidiaries or any other Person) relating to the Collateral, this
Agreement or any of the other Loan Documents or any of Borrower’s or any of its
Subsidiaries’ affairs; (2) any attempt to enforce any rights of Administrative
Agent or any Lender against Borrower, any of its Subsidiaries or any other
Person which may be obligated to Administrative Agent or any Lender by virtue
of this Agreement or any of the other Loan Documents, including, without
limitation, the Account Debtors; or (3) any attempt to protect, preserve,
restore, collect, sell, liquidate or otherwise dispose of or realize upon the Collateral;
then all such legal and accounting expenses and other costs and out-of-pocket
expenses of Administrative Agent or the Joint Lead Arrangers (as applicable)
shall be charged to Borrower; provided, that Borrower shall not be
responsible for any such legal and accounting and other costs and out-of-pocket
expenses (x) to the extent incurred because of the gross negligence or willful
misconduct of Administrative Agent or such Joint Lead Arrangers (as applicable)
as determined by a final non-appealable (or the time to appeal for which has
run) judgment of a court of competent jurisdiction or (y) to the extent such
costs and expenses result from a claim brought by Borrower against
Administrative Agent or such Joint Lead Arranger (as applicable) for breach in
bad faith of such Person’s obligations hereunder, if Borrower has obtained a
final non-appealable (or the time to appeal for which has run) judgment in its
favor on such claim as determined by a court of competent jurisdiction.  All amounts chargeable to Borrower under this
subsection 2.7 shall be Obligations secured by all of the
Collateral, shall be payable on demand to Administrative Agent or the
applicable Joint Lead Arranger, as the case may be, and shall bear interest
from the date such demand is made until paid in full at the rate applicable to
Base Rate Portions from time to time. 
Borrower shall also reimburse Administrative Agent for expenses incurred
by Administrative Agent in its administration of the Collateral to the extent
and in the manner provided in subsections 2.8 and 2.9
hereof.

 

2.8              Bank Charges.  Borrower
shall pay to Administrative Agent, for the benefit of itself or the applicable
Lenders, on demand, any and all reasonable fees, costs or expenses which
Administrative Agent or any Lender pays to a bank or other similar institution
arising out of or in connection with (i) the forwarding to Borrower, any
of its Subsidiaries or any other Person on behalf of Borrower, by
Administrative Agent or any Lender, of proceeds of Term Loans made to Borrower
pursuant to this Agreement and (ii) the depositing for collection by
Administrative Agent or any Lender of any check or

 

3

 

item of
payment received or delivered to Administrative Agent or any Lender on account
of the Obligations.

 

2.9              Collateral Protection Expenses; Appraisals. 
All reasonable out-of-pocket expenses incurred in protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral, and
any and all excise, property, sales, and use taxes imposed by any state,
federal, or local authority on any of the Collateral or in respect of the sale
thereof shall be borne and paid by Borrower. 
All such expenses shall be payable upon demand, and if Borrower fails to
promptly pay any portion thereof when due, Administrative Agent may, at its
option, but shall not be required to, pay the same and charge Borrower
therefor.  Additionally, if a Default or
Event of Default shall have occurred and be continuing, Borrower shall bear the
cost and expense of appraisals from appraisers engaged by Administrative Agent
from time to time (who may be personnel of Administrative Agent), stating the
then current fair market value of all or any portion of the real estate or
personal property of any Credit Party or any of its Subsidiaries, including
without limitation the Inventory of any Credit Party and its Subsidiaries.

 

2.10        Payment of Charges.  All amounts
chargeable to Borrower under this Agreement shall be Obligations secured by all
of the Collateral, shall be, unless specifically otherwise provided, payable on
demand and shall bear interest from the date demand was made or such amount is
due, as applicable, until paid in full at the Default Rate.

 

2.11        No Deductions.

 

2.11.1                  Any and all payments or
reimbursements made hereunder or under any other Loan Document shall be made
free and clear of and without deduction for any and all taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto;
excluding, however, the following:  (x)
taxes imposed on or measured by the net income of Administrative Agent or any
Lender or franchise taxes by the United States or by the jurisdiction under the
laws of which Administrative Agent or any Lender is organized or doing business
or any political subdivision thereof and (y) taxes imposed on or measured by
its net income by the jurisdiction of Administrative Agent’s or such Lender’s
applicable lending office or any political subdivision thereof or franchise
taxes (all such taxes, levies, imposts, deductions, charges or withholdings and
all liabilities with respect thereto, excluding such taxes imposed on net
income, herein “Tax Liabilities”).  If Borrower or any Subsidiary Guarantor shall
be required by law to deduct any such Tax Liabilities from or in respect of any
sum payable or reimbursable hereunder or under any other Loan Document to
Administrative Agent or any Lender, then (x) the sum so payable or reimbursable
shall be increased as may be necessary so that, after all required deductions
are made, Administrative Agent or such Lender receives an amount equal to the
sum it would have received had no such deductions been made, (y) Borrower or
such Subsidiary Guarantor shall make such deductions and pay the full amount deducted
to the relevant taxing authority or other authority in accordance with
applicable law and (z) Borrower or such Subsidiary Guarantor shall deliver to
Administrative Agent evidence of such payment.

 

4

 

2.11.2                  In addition Borrower agrees to pay
any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies of the United States or any political
subdivision thereof or any applicable foreign jurisdiction, and all liabilities
with respect thereto, which arise from any payment made under any Loan Document
or from the execution, delivery or registration of, or otherwise with respect
to, any Loan Document (collectively, “Other
Taxes”).

 

2.11.3                  Borrower shall indemnify
Administrative Agent and each Lender for the amount of Tax Liabilities and
Other Taxes (including any Tax Liabilities or Other Taxes imposed by any
jurisdiction on amounts payable under this subsection 2.11) paid by
Administrative Agent or such Lender (as the case may be) and any liability
(including for penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Tax Liabilities or Other Taxes were
correctly or legally asserted.  This
indemnification payment shall be made within 30 days from the date
Administrative Agent or such Lender (as the case may be) makes written demand
therefor.

 

2.11.4                  Each Lender that is organized under
the laws of any jurisdiction other than the United States or any state or
political subdivision thereof agrees (i) to furnish to Administrative
Agent and Borrower (x) either IRS Form W-8BEN or IRS Form W-8ECI, in each case
certifying such Lender’s entitlement to a complete exemption from, or a reduced
rate of, United States federal withholding tax on all payments made hereunder
or under any other Loan Document, (y) to the extent that such Lender does not
act or ceases to act for its own account with respect to any portion of any
amounts paid or payable to such Lender hereunder or under any other Loan
Document, IRS Form W-8IMY together with any information such Lender chooses to
transmit with such form, and any other certificate or statement required under
applicable United States laws and regulations, to establish that such Lender is
not acting for its own account with respect to a portion of any such amounts
paid or payable to such Lender or (z) any other form, certificate or document
prescribed by the IRS certifying as to such Lender’s entitlement to complete
exemption from, or a reduced rate of, United States federal withholding tax on
all payments made hereunder or under any other Loan Document, (ii) to
provide to Administrative Agent and Borrower new forms upon the obsolescence of
any previously delivered forms and comparable statements in accordance with
applicable United States laws and regulations and amendments, duly executed and
completed by such Lender, and (iii) to comply from time to time with all
applicable United States laws and regulations with regard to such withholding
tax exemption or reduction in withholding tax rate.  Notwithstanding any other provision of this subsection 2.11.4,
no Lender that is organized under the laws of any jurisdiction other than the
United States or any state or political subdivision thereof shall be required
to deliver after the date such Lender became a party to this Agreement any
form, certificate, document or statement pursuant to this subsection 2.11.4
that such Lender is not legally entitled to deliver.

 

2.11.5                  Notwithstanding anything to the contrary
contained in subsection 2.11.1, (i) Borrower shall be entitled, to
the extent it is required to do so by law, to deduct or withhold Tax
Liabilities imposed by the United States (or any political subdivision or
taxing authority thereof or therein) from interest, fees or other amounts payable

 

5

 

hereunder for the
account of any Lender that is organized under the laws of any jurisdiction
other than the United States or any state or political subdivision thereof to
the extent that such Lender has not provided to Borrower IRS forms that
establish entitlement to a complete exemption from, or a reduced rate of,
United States federal withholding tax (and Borrower hereby agrees to give
Administrative Agent prompt written notice in the event that it is required to
so deduct or withhold) and (ii) Borrower shall not be obligated pursuant to subsection 2.11.1
hereof to pay additional amounts to any Lender that is organized under the laws
of any jurisdiction other than the United States or any state or political
subdivision thereof in respect of Tax Liabilities imposed by the United States
to the extent that (x) the obligation to pay such additional amounts would not
have arisen but for the failure of such Lender to comply with the requirements
of subsection 2.11.4 or (y) the obligation to pay such additional
amounts does not result from a change in applicable laws (including applicable
statutes, regulations, administrative interpretations, judicial decisions and
treaties) occurring after the date on which such Lender became a party to this
Agreement.

 

2.11.6                  Within 30 days after the date of any
payment of Tax Liabilities or Other Taxes, Borrower shall furnish to
Administrative Agent the original or a certified copy of a receipt (or any
other form, certificate or document reasonably acceptable to Administrative
Agent) evidencing payment thereof.

 

2.11.7                  Without prejudice to the survival of
any other agreement of Borrower hereunder, the agreements and obligations of
Borrower contained in this subsection 2.11 shall survive the
termination of this Agreement and the payment in full of the Obligations.

 

2.11.8                  If any Lender determines, in its
sole discretion, that it has actually received a refund in respect of any Tax
Liabilities with respect to which Borrower has paid additional amounts to such
Lender pursuant to subsection 2.11.1, such Lender shall promptly
notify Administrative Agent and pay such refund over to Borrower (but only to
the extent of additional amounts paid by Borrower under subsection 2.11.1
with respect to Tax Liabilities giving rise to such refund), on an after-tax
basis, net of all expenses incurred by such Lender in connection with obtaining
such refund and without interest; provided, that Borrower, upon the request
of such Lender, shall repay to such Lender the amount previously paid over to
Borrower (plus any penalties, interest or other charges imposed by the relevant
taxing authority) in the event that such Lender is required to repay such
refund to such taxing authority.  Nothing
in this subsection 2.11.8 shall interfere with the right of any
Lender to arrange its tax affairs in whatever manner it deems fit or require
any Lender to disclose to Borrower, any of its Subsidiaries or any other Person
any information or any computations relating to its tax affairs.

 

2.11.9                  (a) If Administrative Agent or any
Lender claims reimbursement or compensation under this subsection 2.11,
Administrative Agent shall determine the amount thereof and shall deliver to
Borrower (with, if applicable, a copy to the affected Lender) a statement
setting forth in reasonable detail the amount payable to Administrative Agent
or the affected Lender, and such statement shall be conclusive and binding on
Borrower in the absence of manifest error. 
Failure or delay on the part of

 

6

 

Administrative Agent
or any Lender to demand compensation pursuant to this subsection 2.11
shall not constitute a waiver of Administrative Agent’s or such Lender’s right
to demand such compensation; provided that Borrower shall not be
required to compensate Administrative Agent or a Lender pursuant to this subsection 2.11
for any Tax Liabilities, Other Taxes or additional amounts incurred more than
180 days prior to the date that Administrative Agent or such Lender, as the
case may be, notifies Borrower of its intention to claim compensation under
this subsection; provided  further that, if the circumstances
giving rise to such claim are retroactive, then the 180-day period referred to
above shall be extended to include the period of retroactive effect thereof.

 

(b)                                 If a Lender claims any
compensation pursuant to this subsection 2.11, then (a) such Lender
shall use reasonable efforts (consistent with legal and regulatory
restrictions) to designate a different lending office or to file any statement
or document reasonably requested by Borrower if the making of such designation
or filing would avoid the need for, or reduce the amount of, any such amounts
and would not, in the sole discretion of such Lender, be otherwise
disadvantageous to such Lender and (b) at Borrower’s request, Administrative
Agent or an Eligible Assignee reasonably acceptable to Administrative Agent and
Borrower shall have the right (but not the obligation) to purchase from such
Lender, and each such Lender shall, upon such request, sell and assign to
Administrative Agent or such Eligible Assignee, all of such Lender’s
outstanding Term Loans hereunder.  Such
sale and assignment shall be consummated promptly after Administrative Agent
has arranged for a purchase by Administrative Agent or an Eligible Assignee
pursuant to an Assignment and Acceptance Agreement, at a price equal to the
outstanding principal balance of such Lender’s Term Loan, plus accrued interest
and fees, without premium or discount.

 

SECTION 3.  LOAN
ADMINISTRATION

 

3.1              Manner
of Borrowing/LIBOR Option. 
Borrowings under the credit facility established pursuant to Section 1
hereof shall be as follows:

 

3.1.1                        Term Loan Request. 
Borrower shall give Administrative Agent notice of its intention to
borrow the Term Loans (such notice to be in the form of Exhibit 3.1.1
hereto), in which notice Borrower shall specify the amount of the proposed
borrowing of Term Loans and the proposed borrowing date (which shall be the
Closing Date), no later than 11:00 a.m. (New York City time) one Business Day
prior to the Closing Date.  All
borrowings made on the Closing Date and during the period ending five (5)
Business Days thereafter must be made as Base Rate Portions.

 

3.1.2                        Disbursement. 
The proceeds of Term Loans requested under subsection 3.1.1
shall be disbursed by Administrative Agent in lawful money of the United States
of America in immediately available funds by wire transfer to such bank account
as may be agreed upon by Borrower and Administrative Agent.

 

3.1.3                        [Intentionally Omitted].

 

3.1.4                        [Intentionally Omitted].

 

7

 

 

3.1.5                        [Intentionally Omitted].

 

3.1.6                        Electronic Communications. 
As an accommodation to Borrower, unless a Default or an Event of Default
has occurred and is continuing, Administrative Agent may, in
Administrative Agent’s sole discretion, permit electronic transmittal of
instructions, authorizations, agreements or reports to Administrative
Agent.  Unless Borrower specifically
directs Administrative Agent in writing not to accept or act upon telephonic or
electronic communications from Borrower, Administrative Agent shall not have
any liability to Borrower or any of its Subsidiaries for any loss or damage
suffered by Borrower or any of its Subsidiaries as a result of Administrative
Agent’s honoring of any requests, execution of any instructions, authorizations
or agreements or reliance on any reports communicated to it telephonically or electronically
and purporting to have been sent to Administrative Agent by Borrower, and
Administrative Agent shall not have any duty to verify the origin of any such
communication or the authority of the Person sending it.

 

3.1.7                        LIBOR Portions. 
Each LIBOR Request shall be irrevocable and binding on Borrower.  In no event shall Borrower be permitted to
have outstanding at any one time LIBOR Portions with more than seven (7)
different Interest Periods.

 

3.1.8                        Conversion of Base Rate Portions. 
Provided that as of both the date of the LIBOR Request and the first day
of the Interest Period, no Default or Event of Default has occurred and is
continuing, Borrower may, on any Business Day more than five (5) Business Days
after the Closing Date, convert any Base Rate Portion into a LIBOR
Portion.  If Borrower desires to convert
a Base Rate Portion, it shall give Administrative Agent a LIBOR Request no
later than 11:00 a.m. (New York City time) on the third Business Day prior to
the requested conversion date.  After
giving effect to any conversion of Base Rate Portions to LIBOR Portions,
Borrower shall not be permitted to have outstanding at any one time LIBOR
Portions with more than seven (7) different
Interest Periods.

 

3.1.9                        Continuation of LIBOR Portions. 
Provided that, as of both the date of the LIBOR Request and the first
day of the Interest Period, no Default or Event of Default has occurred and is
continuing, Borrower may, on any Business Day, continue any LIBOR Portions into
a subsequent Interest Period of the same or a different permitted
duration.  If Borrower desires to
continue a LIBOR Portion, Borrower shall give Administrative Agent a LIBOR
Request no later than 11:00 a.m. (New York City time) on the third Business Day
prior to the requested continuation date. 
After giving effect to any continuation of LIBOR Portions, Borrower
shall not be permitted to have outstanding at any one time LIBOR Portions with
more than seven (7) different Interest Periods. 
If Borrower shall fail to give timely notice of its election to continue
any LIBOR Portion or portion thereof as provided above, or if such continuation
shall not be permitted, such LIBOR Portion or portion thereof, unless such
LIBOR Portion shall be repaid, shall automatically be converted into a Base Rate
Portion at the end of the Interest Period then in effect with respect to such
LIBOR Portion.

 

8

 

3.1.10                  Inability to Make LIBOR Portions. 
Notwithstanding any other provision hereof, if any applicable law,
treaty, regulation or directive, or any change therein or in the interpretation
or application thereof, shall make it unlawful for any Lender (for purposes of
this subsection 3.1.10, the term “Lender”
shall include the office or branch where such Lender or any Person then
controlling such Lender makes or maintains any LIBOR Portions) to make or
maintain its LIBOR Portions, or if with respect to any Interest Period,
Administrative Agent is unable to determine the LIBOR relating thereto, or
adverse or unusual conditions in, or changes in applicable law relating to, the
London interbank market make it, in the reasonable judgment of Administrative
Agent, impracticable to fund therein any of the LIBOR Portions, or make the
projected LIBOR unreflective of the actual costs of funds therefor to any
Lender, then, on notice thereof by such Lender or Administrative Agent (as
applicable) to Borrower (with a copy to Administrative Agent, if applicable),
the obligation of Administrative Agent and Lenders to make or continue LIBOR
Portions or convert Base Rate Portions to LIBOR Portions hereunder shall
forthwith be suspended until such Lender or Administrative Agent notifies
Borrower (with a copy to Administrative Agent, if applicable) that such
circumstances no longer exist and, Borrower shall, if any affected LIBOR
Portions are then outstanding, promptly upon request from Administrative Agent,
convert such affected LIBOR Portions into Base Rate Portions.  Administrative Agent or the relevant Lender
(as applicable) will endeavor to give Borrower prompt notice of the cessation
of the circumstance giving rise to the suspension of LIBOR availability,
provided that the failure to give any such notice shall not result in any
liability of Administrative Agent or any Lender hereunder or in the
modification, alteration, impairment, or waiver of the rights of Administrative
Agent or any Lender hereunder.

 

3.1.11                  Funding by Lenders; Presumption of
Administrative Agent.  Unless Administrative
Agent shall have received notice from a Lender prior to the proposed date of
any borrowing that such Lender will not make available to Administrative Agent
such Lender’s share of such borrowing, Administrative Agent may assume that
such Lender has made such share available on such date and may, in reliance
upon such assumption, make available to Borrower a corresponding amount.  In such event, if a Lender has not in fact
made its share of the applicable borrowing available to Administrative Agent,
then the applicable Lender and Borrower severally agree to pay to
Administrative Agent forthwith on demand such corresponding amount in
immediately available funds with interest thereon, for each day from and
including the date such amount is made available to Borrower to but excluding
the date of payment to Administrative Agent, at (A) in the case of a payment to
be made by such Lender, the greater of the Fed Funds Rate and a rate determined
by the Administrative Agent in accordance with banking industry rules on
interbank compensation and (B) in the case of a payment to be made by Borrower,
the interest rate applicable (or that would be applicable) to any Base Rate
Portion.  If Borrower and such Lender
shall pay such interest to Administrative Agent for the same or an overlapping
period, Administrative Agent shall promptly remit to Borrower the amount of
such interest paid by Borrower for such period. 
If such Lender pays its share of the applicable borrowing to
Administrative Agent, then the amount so paid shall constitute such Lender’s
Term Loan included in such borrowing. 
Any payment by Borrower shall be without prejudice to any claim Borrower
may have against a Lender that shall have failed to make such payment to
Administrative Agent.

 

9

 

3.2              Payments.

 

3.2.1                        Principal.

 

(i)                                     [Intentionally Omitted].

 

(ii)                                  Term Loan. 
Principal payable on account of the Term Loan shall be payable by
Borrower in twenty-one (21) quarterly installments.  Each of the first twenty (20) installments of
principal shall be in an amount equal to $687,500 and shall be payable on the
first day of each quarter, commencing on 
September 30, 2004 and ending on June 30, 2009.  The final installment of principal shall be
in the amount of $261,250,000 or otherwise in an amount equal to the then
remaining principal balance of the Term Loans, and shall be payable on the last
day of the Term.  Each such installment
shall be payable to Administrative Agent for the account of the applicable
Lender.  The Term Loans shall be payable
in full on the last day of the Term. 
Payments or prepayments of the Term Loans may not be reborrowed.

 

3.2.2                        Interest.

 

(i)                                     Base Rate Portion. 
Interest accrued on the Base Rate Portion shall be due and payable on
the earliest of (1) the first calendar day of each fiscal quarter (for the
immediately preceding fiscal quarter), computed through the last calendar day
of the preceding fiscal quarter, (2) the occurrence of an Event of Default in
consequence of which Administrative Agent or Majority Lenders elect to
accelerate the maturity and payment of the Obligations (or in consequence of
which payment of the Obligations is automatically accelerated) or (3)
termination of this Agreement pursuant to Section 4 hereof.

 

(ii)                                  LIBOR Portion. 
Interest accrued on each LIBOR Portion shall be due and payable on each
LIBOR Interest Payment Date and on the earlier of (1) the occurrence of an
Event of Default in consequence of which Administrative Agent or Majority
Lenders elect to accelerate the maturity and payment of the Obligations (or in
consequence of which payment of the Obligations is automatically accelerated)
or (2) termination of this Agreement pursuant to Section 4 hereof.

 

(iii)                               Default Interest. 
Interest accrued on the Obligations at the Default Rate shall be due and
payable on demand by Administrative Agent.

 

3.2.3                        Costs, Fees and Charges. 
Costs, fees and charges payable pursuant to this Agreement shall be
payable by Borrower, as and when provided in Section 2 or Section 3
hereof, as applicable, to Administrative Agent or a Lender, as applicable, or
to any other Person designated by Administrative Agent or such Lender in
writing.

 

3.2.4                        Other Obligations. 
The balance of the Obligations requiring the payment of money, if any,
shall be payable by Borrower to Administrative Agent for distribution to
Lenders, as appropriate, as and when provided in this Agreement, the Other
Agreements or the Security Documents, or if not so provided, on demand.

 

 

10

 

3.2.5                        Prepayment of/Failure to Borrow
LIBOR Portions.  Borrower may prepay a LIBOR Portion only upon
three (3) Business Days’ prior written notice to Administrative Agent (which
notice shall be irrevocable).  In the
event of (i) the payment of any principal of any LIBOR Portion other than
on the last day of the Interest Period applicable thereto (including as a
result of an Event of Default), (ii) the conversion of any LIBOR Portion
other than on the last day of the Interest Period applicable thereto, or
(iii) the failure to borrow, convert, continue or prepay any LIBOR Portion
on the date specified in any notice delivered pursuant hereto, then, in any
such event, Borrower shall compensate each Lender for the loss, cost and
expense attributable to such event, as determined by such Lender in a manner
consistent with its customs and practices. 
If any Lender claims compensation under this subsection 3.2.5,
such Lender shall determine the amount thereof and shall deliver to Borrower,
within 30 days of the occurrence of the Breakage Event giving rise to a claim
for compensation, a statement setting forth in reasonable detail the amount
payable to such Lender, and such statement shall be conclusive and binding on
Borrower in the absence of manifest error. 
Amounts payable pursuant to this subsection 3.2.5 shall be
due and payable by Borrower within 10 days of receipt of such statement from
such Lender.

 

3.2.6                        Payments by Borrower; Presumptions
by Administrative Agent.  Unless
Administrative Agent shall have received notice from Borrower prior to the date
on which any payment is due to Administrative Agent for the account of the
Lenders hereunder that Borrower will not make such payment, Administrative
Agent may assume that Borrower has made such payment on such date in accordance
herewith and may, in reliance upon such assumption, distribute to the Lenders
the amount due.  In such event, if
Borrower has not in fact made such payment, then each of the Lenders severally
agrees to repay to Administrative Agent forthwith on demand the amount so
distributed to such Lender, in immediately available funds with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to Administrative Agent, at the greater
of the Federal Funds Rate and a rate determined by Administrative Agent in
accordance with banking industry rules on interbank compensation.  A notice of Administrative Agent to any
Lender with respect to any amount owing under this subsection 3.2.6
shall be conclusive, absent manifest error.

 

3.3              Mandatory and Optional Prepayments.

 

3.3.1                        Proceeds of Sale, Loss, Destruction
or Condemnation of Collateral.  Except with
respect to sales or dispositions permitted by subsection 8.2.8
(unless subsection 8.2.8 specifically provides for a prepayment of
the Term Loans and other Obligations), if (a) Borrower or any of its
Subsidiaries sells any of its Property or if any Property of Borrower or any of
its Subsidiaries is lost or destroyed or taken by condemnation, and (b) at the
time that a prepayment of Term Loans or other Obligations would otherwise be
required under this subsection 3.3.1, the Available Liquidity is
greater than or equal to $50,000,000 after giving effect to such prepayment,
then Borrower shall, unless otherwise agreed to by the Majority Lenders and, in
any event, only to the extent Borrower does not apply such Net Cash Proceeds to
the obligations under the First Lien Debt Documents through the optional or
mandatory prepayment of

 

11

 

the principal amount
of such obligations (and, if such prepayment is in respect of an amount that
can, by its terms, be reborrowed, a corresponding permanent reduction of
commitments) pursuant to the terms thereof, pay to Administrative Agent for the
ratable benefit of Lenders as and when received by Borrower or any such
Subsidiary as a mandatory prepayment of the Term Loans and other Obligations,
as herein provided, a sum equal to the Net Cash Proceeds received by Borrower
or such Subsidiary from such sale, loss, destruction or condemnation, to be
applied to the Term Loans as follows:

 

(i)                                     except as provided in clause (ii)
below, the applicable prepayments of Term Loans pursuant to this subsection 3.3.1
(or pursuant to subsection 3.3.2 or 3.3.4) shall be applied
to the installments of principal payable in respect of the Term Loans, in the
inverse order of maturity (beginning with the payment due on the last day of
the Term), ratably amongst any Base Rate Portion and all LIBOR Portions (and
amongst all Interest Periods thereof) and ratably amongst the Lenders until
paid in full;

 

(ii)                                  notwithstanding clause (i) above,
unless an Event of Default has occurred and is continuing on the date such Net
Cash Proceeds are recovered by Borrower or its applicable Subsidiary,
Administrative Agent shall remit any Net Cash Proceeds with respect to any loss
or destruction of Nonrental Equipment or real Property received by
Administrative Agent to Borrower or its applicable Subsidiary (so long as such
Subsidiary is not a Foreign Subsidiary) for use in replacing or repairing the
damaged Collateral or purchasing assets used or useful in the business of
Borrower or such applicable Subsidiary. 
Pending such use such amounts shall not be required to so prepay the
Term Loans until the expiration of 180 days from such receipt at which point
that portion of such amount which has not been so used during such 180-day
period shall be applied to the Term Loans and other Obligations in the manner
specified in clause (i) of this subsection 3.3.1 until payment
thereof in full.

 

3.3.2                        Proceeds from Issuance of Additional
Indebtedness or Equity.  If (a)
Borrower or any of its Subsidiaries issues any additional Indebtedness (other
than Permitted Indebtedness) or issues any additional equity (other than any
issuance of Securities permitted by clauses (i), (ii), (iii) or (iv) of subsection 8.2.9),
and (b) at the time that a prepayment of Term Loans or other Obligations would
otherwise be required under this subsection 3.3.2, the Available
Liquidity is greater than or equal to $50,000,000 after giving effect to such
prepayment, then Borrower shall, to the extent it does not apply such Net Cash
Proceeds to the obligations under the First Lien Debt Documents through the
optional or mandatory prepayment of the principal amount of such obligations
(and, if such prepayment is in respect of an amount that can, by its terms, be
reborrowed, a corresponding permanent reduction of commitments) pursuant to the
terms thereof, pay to Administrative Agent for the ratable benefit of Lenders,
when and as received by Borrower or such Subsidiary and as a mandatory
prepayment of the Obligations, a sum equal to, in the case of such an issuance
of Indebtedness, 100%, or, in the case of such an issuance of equity, 50% of the
Net Cash Proceeds to Borrower or such Subsidiary of the issuance of such
Indebtedness or equity, as applicable. 
Any such prepayment shall be applied to the Term Loans in the manner
specified in clause (i) of subsection 3.3.1.

 

12

 

3.3.3                        [Intentionally Omitted].

 

3.3.4                        Excess Cash Flow. 
No later than the earlier of (i) 100 days after the end of the
period beginning July 1, 2004 and ending December 31, 2005 and each
fiscal year of Borrower thereafter and (ii) 10 days following the date on which
the financial statements with respect to such period are delivered pursuant to subsection 8.1.3(ii)(A),
if, and to the extent that, at the time that a prepayment of Term Loans or
other Obligations would be otherwise required under this subsection 3.3.4,
the Available Liquidity is greater than or equal to $50,000,000 after giving
effect to such prepayment, then Borrower shall, to the extent it does not apply
such Excess Cash Flow to the obligations under the First Lien Debt Documents
through the optional or mandatory prepayment of the principal amount of such
obligations (and, if such prepayment is in respect of an amount that can, by
its terms, be reborrowed, a corresponding permanent reduction of commitments)
pursuant to the terms thereof, pay to Administrative Agent for the ratable
benefit of Lenders an amount equal to 50% of Excess Cash Flow for the period or
fiscal year, as applicable, then ended; provided that any Lender may
elect, by notice to Administrative Agent at least five (5) Business Days prior
to the applicable prepayment date, to decline all or any portion of any
prepayment of its Term Loans pursuant to this subsection 3.3.4 with
respect to the prepayment to be made for the period ending December 31,
2005, in which case the amount of such prepayment that would have been applied
to prepay Term Loans but was so declined may be retained by Borrower to be used
for any other purpose permitted by this Agreement.  Borrower agrees to notify Administrative
Agent of the amount of any prepayment to be offered to the Lenders pursuant to
this subsection 3.3.4 at least seven (7) Business Days prior to the
applicable prepayment date.  Any such
prepayment shall be applied to the Term Loans in the manner specified in clause
(i) of subsection 3.3.1 until the payment thereof in full.

 

3.3.5                        Optional Prepayments. 
Borrower may, at its option from time to time upon not less than one (1)
Business Day’s prior written
notice in the case of a Base Rate Portion or three (3) Business Days’ prior
written notice in the case of a LIBOR Portion to Administrative Agent (such
notice to be in the form of Exhibit 3.3.5), prepay installments of the
Term Loans, provided that the amount of any such prepayment is at least
$500,000 and in integral multiples
of $100,000 above $500,000, and
that such prepayments are made ratably amongst Lenders with respect to all Term
Loans.  Each optional prepayment of Term
Loans shall be applied to ratably reduce each scheduled installment of principal
thereof set forth in subsection 3.2.1(ii).

 

3.3.6                        Call Premiums. 
In addition to charges under subsection 3.2.5 applicable to
prepayments of LIBOR Portions, if applicable, in the event that the Term Loans
are prepaid under subsections 3.3.1, 3.3.2 or 3.3.5 in
whole or in part prior to the second anniversary of the Closing Date, Borrower
shall pay to the Lenders a prepayment premium on the amount so prepaid as
follows:

 

13

 

 

	
  Relevant Period

  	
   

  	
  Prepayment Premium as a

  Percentage of the Amount so

  Prepaid

  	
   

  
	
  On or prior
  to the first anniversary of the

  Closing Date:

  	
   

  	
  2.0

  	
  %

  
	
  On or prior
  to the second anniversary of

  the Closing Date, but after the first

  anniversary of the Closing Date:

  	
   

  	
  1.0

  	
  %

  

 

3.4              Application of Payments and Collections.

 

3.4.1                        Collections. 
All items of payment received by Administrative Agent by 12:00 noon, New
York City time, on any Business Day shall be deemed received on that Business
Day.  All items of payment received after
12:00 noon, New York City time, on any Business Day shall be deemed received on
the following Business Day.  Except as
otherwise expressly provided herein, all payments by Credit Parties hereunder
shall be made to Administrative Agent for the account of the respective Lenders
to which such payment is owed, at Administrative Agent’s office in dollars and
United States dollars.  Administrative
Agent will promptly distribute to each Lender its Aggregate Percentage (or
other applicable share as provided herein) of such payment in like funds as received
by wire transfer to such Lender’s lending office.

 

3.4.2                        Apportionment, Application and
Reversal of Payments.  Principal and interest
payments shall be apportioned ratably among Lenders (according to the unpaid
principal balance of the Term Loans to which such payments relate held by each
Lender).  All payments shall be remitted
to Administrative Agent and all such payments not relating to principal or
interest in respect of specific Term Loans, or not constituting payment of
specific fees, and all proceeds of Accounts and Inventory, or, except as
provided in subsection 3.3.1, other Collateral received by
Administrative Agent, shall be applied, ratably, subject to the provisions of
this Agreement, first, to pay any fees, indemnities, or expense
reimbursements then due to Administrative Agent or Lenders from Borrower; second,
to pay interest due from Borrower in respect of all Term Loans; third,
to pay or prepay principal of all Term Loans; and fourth, to the payment
of any other Obligation due to Administrative Agent or any Lender by
Borrower.  After the occurrence and
during the continuance of an Event of Default, Administrative Agent shall have
the continuing exclusive right to apply and reapply any and all such payments
and collections received at any time or times hereafter by Administrative Agent
or its agent against the Obligations, in such manner as Administrative Agent
may deem advisable, notwithstanding any entry by Administrative Agent or any
Lender upon any of its books and records, provided that such application or
reapplication shall be consistent with the terms of this subsection 3.4.2.

 

14

 

3.5              All Term Loans to Constitute One Obligation. 
The Term Loans shall constitute one general Obligation of Borrower and
shall be secured by Administrative Agent’s Lien upon all of the Collateral.

 

3.6              Loan Account. 
Administrative Agent shall enter all Term Loans as debits to a loan
account (the “Loan Account”) and
shall also record in the Loan Account all payments made by Borrower on any
Obligations and all proceeds of Collateral which are finally paid to
Administrative Agent, and may record therein, in accordance with customary
accounting practice, other debits and credits, including interest and all
charges and expenses properly chargeable to Borrower pursuant to this Agreement
or any other Loan Document.

 

3.7              [Intentionally Omitted]

 

3.8              Increased Costs.  If any law or
any governmental or quasi-governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law) adopted or implemented after
the date of this Agreement and having general applicability to all banks or
finance companies within the jurisdiction in which any Lender operates
(excluding, for the avoidance of doubt, the effect of and phasing in of capital
requirements or other regulations or guidelines passed prior to the date of
this Agreement), or any interpretation or application thereof by any
governmental authority charged with the interpretation or application thereof,
or the compliance of such Lender therewith, shall:

 

(i)                                     (1)  subject such Lender
to any tax with respect to this Agreement (other than (a) any tax based on or
measured by net income or otherwise in the nature of a net income tax,
including, without limitation, any franchise tax or any similar tax based on
capital, net worth or comparable basis for measurement and (b) any tax
collected by a withholding on payments and which neither is computed by
reference to the net income of the payee nor is in the nature of an advance
collection of a tax based on or measured by the net income of the payee) or
(2) change the basis of taxation of payments to such Lender of principal,
fees, interest or any other amount payable hereunder or under any Loan Documents
(other than in respect of (a) any tax based on or measured by net income or
otherwise in the nature of a net income tax, including, without limitation, any
franchise tax or any similar tax based on capital, net worth or comparable
basis for measurement and (b) any tax collected by a withholding on payments
and which neither is computed by reference to the net income of the payee nor
is in the nature of an advance collection of a tax based on or measured by the
net income of the payee);

 

(ii)                                  impose, modify or hold applicable
any reserve (except any reserve taken into account in the determination of the
applicable LIBOR), special deposit, assessment or similar requirement against
assets held by, or deposits in or for the account of, loans by, or other credit
extended by, any office of such Lender, including (without limitation) pursuant
to Regulation D of the Board of Governors of the Federal Reserve System; or

 

15

 

(iii)                               impose on such Lender or the London
interbank market any other condition with respect to any Loan Document;

 

and the result of any of the foregoing is to increase the cost to such
Lender of making, renewing or maintaining Term Loans hereunder or the result of
any of the foregoing is to reduce the rate of return on such Lender’s capital
as a consequence of its obligations hereunder, or the result of any of the
foregoing is to reduce the amount of any payment (whether of principal,
interest or otherwise) in respect of any of the Term Loans, then, in any such
case, Borrower shall pay such Lender, upon 
written demand therefor not later than thirty (30) days following its
receipt of notice of the imposition of such increased costs, such additional
amount as will compensate such Lender for such additional cost or such
reduction, as the case may be, to the extent such Lender has not otherwise been
compensated, with respect to a particular Term Loan, for such increased cost as
a result of an increase in the Base Rate or the LIBOR.  An officer of the applicable Lender shall
determine the amount of such additional cost or reduced amount using reasonable
averaging and attribution methods and deliver to Borrower a written statement
setting forth the amount of such additional cost or reduced amount, including
an explanation of such additional cost or reduction.  Such written statement shall be conclusive
absent demonstrable error.  Failure or
delay on the part of any Lender to demand compensation pursuant to this subsection 3.8
shall not constitute a waiver of such Lender’s right to demand such
compensation; provided that Borrower shall not be required to compensate
a Lender pursuant to this subsection 3.8 for any increased costs or
reductions incurred more than 180 days prior to the date that such Lender
notifies Borrower of its intention to claim compensation under this subsection;
provided, further that, if the circumstances giving rise to such
claim are retroactive, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.  If a Lender claims any additional cost or
reduced amount pursuant to this subsection 3.8, then (a) such
Lender shall use reasonable efforts (consistent with legal and regulatory
restrictions) to designate a different lending office or to file any statement
or document reasonably requested by Borrower if the making of such designation
or filing would avoid the need for, or reduce the amount of, any such
additional cost or reduced amount and would not, in the sole discretion of such
Lender, be otherwise disadvantageous to such Lender and (b) at Borrower’s
request, Administrative Agent or an Eligible Assignee reasonably acceptable to
Administrative Agent and Borrower shall have the right (but not the obligation)
to purchase from such Lender, and each such Lender shall, upon such request,
sell and assign to Administrative Agent or such Eligible Assignee, all of such
Lender’s outstanding Term Loans hereunder. 
Such sale and assignment shall be consummated promptly after
Administrative Agent has arranged for a purchase by Administrative Agent or an
Eligible Assignee pursuant to an Assignment and Acceptance Agreement, at a
price equal to the outstanding principal balance of such Lender’s Term Loans,
plus accrued interest and fees, without premium or discount.

 

3.9              Basis for Determining Interest Rate Inadequate. 
In the event that Administrative Agent or any Lender shall have
determined that:

 

(i)                                     reasonable means do not exist for
ascertaining the LIBOR for any Interest Period; or

 

16

 

(ii)                                  Dollar deposits in the relevant
amount and for the relevant maturity are not available in the London interbank
market with respect to a proposed LIBOR Portion, or a proposed conversion of a
Base Rate Portion into a LIBOR Portion; then

 

Administrative Agent or such Lender shall give Borrower prompt written,
telephonic or electronic notice of the determination of such effect.  If such notice is given and until
Administrative Agent or such Lender shall notify Borrower that the circumstance
giving rise to such notice no longer exists, (i) any such requested LIBOR
Portion shall be made as a Base Rate Portion, unless Borrower shall notify
Administrative Agent no later than 10:00 a.m. (New York City time) three (3)
Business Days’ prior to the date of such proposed borrowing that the request
for such borrowing shall be canceled or made as an unaffected type of LIBOR
Portion, and (ii) any Base Rate Portion which was to have been converted to an
affected type of LIBOR Portion shall be continued as or converted into a Base
Rate Portion, or, if Borrower shall notify Administrative Agent, no later than
10:00 a.m. (New York City time) three (3) Business Days prior to the proposed
conversion, shall be maintained as an unaffected type of LIBOR Portion.  Administrative Agent or the relevant Lender
(as applicable) will endeavor to give Borrower prompt notice of the cessation
of the circumstances giving rise to the suspension of LIBOR availability,
provided that the failure to give any such notice shall not result in any
liability of Administrative Agent or any Lender hereunder or in the
modification, alteration, impairment, or waiver of the rights of Administrative
Agent or any Lender hereunder.

 

3.10        Sharing of Payments, Etc.  If any Lender
shall obtain any payment (whether voluntary, involuntary, through the exercise
of any right of setoff, or otherwise) on account of any Term Loan made by it
(other than any payment (x) pursuant to subsection 2.11 or subsection 3.8,
(y) in connection with an assignment of its interest hereunder pursuant to subsection 11.9
or (z) in connection with any amendment or waiver as contemplated by the last
sentence of subsection 11.10) in excess of its ratable share of
payments on account of Term Loans made by all Lenders, such Lender shall
forthwith purchase from each other Lender such participation in such Term Loan
as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each other Lender; provided, that, if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lenders the purchase price to the extent of such
recovery, together with an amount equal to such Lender’s ratable share
(according to the proportion of (i) the amount of such Lender’s required
repayment to (ii) the total amount so recovered from the purchasing
Lender) of any interest or other amount paid or payable by the purchasing
Lender in respect of the total amount so recovered.  Borrower agrees that any Lender so purchasing
a participation from another Lender pursuant to this subsection 3.10
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of setoff) with respect to such participation as fully as
if such Lender were the direct creditor of Borrower in the amount of such
participation.  Notwithstanding anything
to the contrary contained herein, all purchases and repayments to be made under
this subsection 3.10 shall be made through Administrative Agent.

 

17

 

SECTION 4.  TERM AND TERMINATION

 

4.1              Term of Agreement.  This
Agreement shall be in effect for a period of 6 years from the date hereof,
through and including August 17, 2010 (the “Term”), unless terminated as provided in subsection 4.2
hereof.

 

4.2              Termination.

 

4.2.1                        Termination by Lenders. 
Administrative Agent may, and at the direction of Majority Lenders
shall, accelerate the Obligations, all without notice upon or after the
occurrence and during the continuance of an Event of Default in accordance with
subsection 10.2.

 

4.2.2                        Termination by Borrower. 
Upon at least three (3) Business Days prior written notice to
Administrative Agent and Lenders, Borrower may, at its option, terminate this
Agreement; provided, however, that (i) no such termination shall be effective
until Borrower has paid to Administrative Agent’s satisfaction all of the
Obligations (other than unasserted contingent indemnification obligations that
are not then due and payable, whether by acceleration, termination or
otherwise), in immediately available funds, and (ii) any such termination
occurring prior to the second anniversary of the date hereof shall be accompanied
by the prepayment premium on the amount prepaid set forth in subsection 3.3.6.  Any notice of termination given by Borrower
shall be irrevocable unless all Lenders otherwise agree in writing (provided
that a notice of a refinancing of the entirety of the Term Loans delivered by
Borrower may state that such notice is conditioned upon the effectiveness of
other credit facilities, in which case such notice may be revoked by Borrower
(by notice to Administrative Agent on or prior to the effective date) if such
condition is not satisfied).  Borrower
may elect to terminate this Agreement in its entirety only.  No section of this Agreement may be
terminated singly.

 

4.2.3                        Effect of Termination. 
All of the Obligations (other than 
unasserted contingent indemnification obligations that are not then due
and payable, whether by acceleration, termination or otherwise) shall be
immediately due and payable upon the termination date stated in any notice of
termination of this Agreement.  All
undertakings, agreements, covenants, warranties and representations of any
Credit Party contained in the Loan Documents shall survive any such termination
and the payment in full of the Obligations, and Administrative Agent shall
retain its Liens in the Collateral and Administrative Agent and each Lender
shall retain all of its rights and remedies under the Loan Documents
notwithstanding such termination until all Obligations (other than  unasserted contingent indemnification
obligations that are not then due and payable, whether by acceleration,
termination or otherwise) have been discharged or paid, in full, in immediately
available funds, including, without limitation, all Obligations under subsection 3.2.5
or subsection 3.3.6, if any, resulting from such termination.  Notwithstanding the foregoing or the payment
in full of the Obligations, (i) Administrative Agent shall not be required to
terminate its Liens in the Collateral unless, with respect to any loss or
damage Administrative Agent or any Lender may incur as a result of dishonored
checks or other items of payment received by Administrative Agent from Borrower
or any Account Debtor and applied to the Obligations, Administrative

 

18

 

Agent shall, at its
option, (A) have received a written agreement reasonably satisfactory to
Administrative Agent, executed by Borrower and by any Person whose loans or
other advances to Borrower are used in whole or in part to satisfy the
Obligations, indemnifying Administrative Agent or such Lender (as applicable)
from any such loss or damage or (B) have retained cash Collateral or other
Collateral for such period of time as Administrative Agent or such Lender (as
applicable), in its reasonable discretion, may deem necessary to protect
Administrative Agent or such Lender (as applicable) from any such loss or
damage and (ii) the indemnification obligations of each Credit Party under subsection 13.2
shall survive the payment in full of the Obligations and the termination of
this Agreement.

 

SECTION 5.  SECURITY INTERESTS

 

5.1              Security Interest in Collateral

 

5.1.1                        Grant of Security Interest. 
To secure the prompt payment and performance to Administrative Agent and
each Lender of the Obligations, each Credit Party hereby grants to
Administrative Agent for the benefit of itself and each Lender a continuing
Lien upon all of the following Property and interests in Property of such
Credit Party, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located:

 

(i)                                     Accounts;

 

(ii)                                  Certificated Securities;

 

(iii)                               Chattel Paper;

 

(iv)                              Computer Hardware and 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;

 

(v)                                 Deposit Accounts;

 

(vi)                              Documents;

 

(vii)                           Equipment;

 

(viii)                        Financial Assets;

 

(ix)                                Fixtures;

 

(x)                                   General Intangibles, including
Payment Intangibles and Software;

 

19

 

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

 

(xii)                             Instruments;

 

(xiii)                          Intellectual Property;

 

(xiv)                         Inventory;

 

(xv)                            Investment Property;

 

(xvi)                         Money;

 

(xvii)                      Letter-of-Credit Rights;

 

(xviii)                   Payment Intangibles;

 

(xix)                           Security Entitlements;

 

(xx)                              Software;

 

(xxi)                           Supporting Obligations;

 

(xxii)                        Uncertificated Securities; and

 

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

 

together with 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; provided, however, that in no event shall
Collateral include Investment Property or General Intangibles consisting of
equity securities of an issuer that is a Subsidiary of a Credit Party organized under the laws
of a jurisdiction other than the United States or a state thereof (a “Foreign Subsidiary”) in excess of 65% of
the total combined voting power of all equity securities of such Foreign
Subsidiary; provided, further, that Collateral shall not include
any lease, license or permit if, to the extent that and for as long as (a) the
grant of a security interest therein constitutes or would result in the
termination of, breach of or a default under the lease, instrument or agreement
by which such lease, license or permit is governed and (b) such termination, breach
or default is not rendered ineffective pursuant to Sections 9-406, 9-407, 9 408
or 9-409 of the UCC, provided, that (1) 
such lease, license or permit will be excluded from the Collateral only
to the extent and for as long as the conditions set forth in the foregoing
clauses (a) and (b) are and remain satisfied and to the extent such assets
otherwise constitute Collateral, will cease to be excluded, and will become
subject to the Liens hereunder, immediately and automatically at such time as
such conditions cease to exist, including by reason of any waiver or consent
under the applicable lease, instrument

 

20

 

or agreement, and (2) the Proceeds of any sale, lease or other
disposition of any such lease, license or permit shall not be excluded from the
Collateral and shall at all times be and remain subject to the Liens hereunder.

 

5.1.2                        Second Lien. 
Notwithstanding anything herein to the contrary, the lien and security
interest granted to Administrative Agent pursuant to this Agreement and the
exercise of any right or remedy in respect of the Collateral by Administrative
Agent hereunder are subject to the provisions of the Intercreditor Agreement,
including the rights of the First Lien Debt Agent to exercise control with
respect to such Collateral as and to the extent set forth in the Intercreditor
Agreement.  In the event of any conflict
between the terms of the Intercreditor Agreement and the provisions of Section 5
or 6 of this Agreement relating to the Collateral, the terms of the
Intercreditor Agreement shall govern.

 

5.2              Other Collateral.

 

5.2.1                        Commercial Tort Claims. 
Each Credit Party shall promptly notify Administrative Agent in writing
upon any Credit Party obtaining knowledge that it has incurred or otherwise
obtained a Commercial Tort Claim after the Closing Date against any third party
and, upon request of Administrative Agent, promptly enter into an amendment to
this Agreement and do such other acts or things deemed appropriate by
Administrative Agent to grant to Administrative Agent a security interest in
any such Commercial Tort Claim.  Each
Credit Party represents and warrants that as of the date of this Agreement, to
their knowledge, no Credit Party possesses any Commercial Tort Claims.

 

5.2.2                        Motor Vehicles. 
Upon the acquisition after Closing Date by any Credit Party of any Motor
Vehicle, such Credit Party shall promptly notify Administrative Agent of such
acquisition in writing, setting forth a description of the Motor Vehicle
acquired and a good faith estimate of the current value of such Motor
Vehicle.  In addition, each Credit Party
shall (a) cause all Motor Vehicles, now owned or hereafter acquired by any
Credit Party, which under applicable law are required to be registered, to be
properly registered in the name of such Credit Party, (b) cause all Motor
Vehicles, now owned or hereafter acquired by any Credit Party, to be properly
titled in the name of such Credit Party and (c) cause Administrative Agent’s
Lien in such Motor Vehicles to be a perfected security interest by noting
Administrative Agent’s Lien therein on such certificates or through any other
security arrangement acceptable to Administrative Agent in its sole discretion,
and deliver to Administrative Agent evidence of their compliance with the
foregoing provisions of this subsection 5.2.2, including, without
limitation, if requested by Administrative Agent, originals of all such
certificates of title or ownership for such Motor Vehicles, subject in terms of
priority only to the Lien of the First Lien Debt Agent for so long as any First
Lien Debt remains outstanding, and thereafter a first priority Lien.  Notwithstanding the foregoing, Credit Parties
shall have until the date that is 180 days after the Closing Date (as such date
may be extended by the First Lien Debt Agent in its sole discretion up to 270
days after the Closing Date) to complete the actions in the foregoing clause
(c) with respect to Motor Vehicles owned by any Credit Party as of the Closing
Date.  Any certificates of title or
ownership delivered

 

21

 

pursuant to the terms
hereof shall be accompanied by odometer statements for each Motor Vehicle
covered thereby.

 

5.2.3                        Other Collateral. 
Each Credit Party shall: (i) notify Administrative Agent in writing
promptly upon (or in the case of Deposit Accounts prior to) acquiring or
otherwise obtaining any Collateral after the date hereof consisting of Deposit
Accounts, Investment Property, Letter-of-Credit Rights or Electronic Chattel
Paper; (ii) except with regard to Excluded Deposit Accounts (unless otherwise
requested by the First Lien Debt Agent) promptly execute such other documents,
and do such other acts or things necessary to perfect the Lien of
Administrative Agent with respect to such Collateral by “control” (within the
meaning of the applicable section of the UCC), subject to the rights of
the First Lien Debt Agent to exercise control with respect to such Collateral
to the extent required by the Intercreditor Agreement; (iii) promptly notify
Administrative Agent in writing upon acquiring or otherwise obtaining any
Collateral after the date hereof consisting of Documents or Instruments and
will promptly execute such other documents, and do such other acts or things necessary
to perfect the Lien of Administrative Agent by possession (within the meaning
of Section 9-313 of the UCC) of such Documents which are negotiable and
Instruments, and, with respect to nonnegotiable Documents, subject to the terms
of the Intercreditor Agreement, to have such nonnegotiable Documents issued in
the name of Administrative Agent; and (iv) with respect to Collateral in the
possession of a third party, other than Certificated Securities and Goods
covered by a Document, obtain an acknowledgement from the third party that it
is holding the Collateral for the benefit of Administrative Agent.

 

5.3              Lien Perfection; Further Assurances. 
Each Credit Party shall execute such instruments, assignments or
documents as are necessary to perfect Administrative Agent’s Lien upon any of
the Collateral and shall take such other action as may be required to perfect
or to continue the perfection of Administrative Agent’s Lien upon the
Collateral and shall take such other actions as may be reasonably requested by
Administrative Agent to ensure priority (subject to the Lien of the First Lien
Debt Agent) of such Lien.  Each Credit
Party hereby authorizes Administrative Agent to file financing statements that
indicate the Collateral (i) as “all assets” of such Credit Party or words of
similar effect, or (ii) as being of an equal or lesser scope, or with greater
or lesser detail, than as set forth in subsection 5.1, on such
Credit Party’s behalf.  Each Credit Party
also hereby ratifies its authorization for Administrative Agent to have filed
in any jurisdiction any like financing statements or amendments thereto if
filed prior to the date hereof.  In
addition, each Credit Party hereby appoints Administrative Agent as its
attorney-in-fact, effective the date hereof and terminating upon the
termination of this Agreement, for the purpose of (A) executing on behalf of
such Credit Party title or ownership applications for filing with appropriate
state agencies to enable Motor Vehicles now owned or hereafter acquired by such
Credit Party to be re-titled and Administrative Agent listed as lienholder
thereof, and (B) filing such applications with such state agencies.  This appointment as attorney-in-fact is
coupled with an interest and is irrevocable until the date on which all of the
Obligations have been paid in full in cash. 
At Administrative Agent’s request, each Credit Party shall also promptly
execute or cause to be executed and shall deliver to Administrative Agent any
and all documents, instruments and

 

22

 

agreements
deemed necessary by Administrative Agent, to give effect to or carry out the
terms or intent of the Loan Documents.

 

5.4              Lien on Realty.  The due and
punctual payment and performance of the Obligations shall also be secured by
the Lien created by the Mortgages upon all owned real Property of Credit
Parties described therein.  If any Credit
Party shall acquire at any time or times hereafter any fee simple interest or
leasehold interest in other real Property (other than leasehold interests in
sales offices or warehouses), such Credit Party agrees promptly to execute and
deliver to Administrative Agent, for its benefit and the ratable benefit of
Lenders, as additional security and Collateral for the Obligations, deeds of
trust, security deeds, mortgages or other collateral assignments reasonably
satisfactory in form and substance to Administrative Agent and its counsel
(herein collectively referred to as “New
Mortgages”) covering such real Property.  The Mortgages and each New Mortgage shall be
duly recorded (at Borrower’s expense) in each office where such recording is
required to constitute a valid Lien on the owned real Property covered
thereby.  With respect to any Mortgage or
any New Mortgage, the relevant Credit Parties shall deliver to Administrative
Agent, at such Credit Party’s expense, mortgagee title insurance policies
issued by a title insurance company reasonably satisfactory to Administrative
Agent, which policies shall be in form and substance reasonably satisfactory to
Administrative Agent and shall insure a valid Lien in favor of Administrative
Agent for the benefit of itself and each Lender on the Property covered
thereby, subject only to Permitted Liens and those other exceptions reasonably
acceptable to Administrative Agent and its counsel.  The relevant Credit Party shall also deliver
to Administrative Agent Phase I Environmental Site Assessments by a consultant
satisfactory to Administrative Agent reasonably necessary to determine
compliance with or liabilities under Environmental Laws of the Property subject
to such New Mortgage and such other usual and customary documents, including,
without limitation, ALTA Surveys of the real Property described in the
Mortgages or any New Mortgage, as Administrative Agent and its counsel may
reasonably request relating to the real Property subject to the Mortgages or
the New Mortgages.

 

SECTION 6.  COLLATERAL
ADMINISTRATION

 

6.1              General.

 

6.1.1                        Location of Collateral. 
All Collateral, other than (a) Inventory being leased or rented to third
parties by Credit Parties in the ordinary course of business, (b) Inventory in
transit, (c) Inventory in the possession of a third party for the purpose of
repair or maintenance and (d) Motor Vehicles, will at all times be kept by
Credit Parties and their Subsidiaries at one or more of the business locations
set forth in Exhibit 6.1.1 hereto, as updated by Borrower from time
to time, and if any such locations are locations of third parties, such Exhibit
so indicates.

 

6.1.2                        Insurance of Collateral. 
Each Credit Party shall maintain and pay for insurance upon all
Collateral wherever located and with respect to the business of such Credit
Party and each of its Subsidiaries, covering casualty, hazard, public liability,
workers’ compensation and such other risks in such amounts as is customary for

 

23

 

companies similarly
situated and with the insurance companies used by Credit Parties on the Closing
Date or such other insurance companies as are reasonably satisfactory to
Administrative Agent.  Borrower shall
deliver certified copies of such policies to Administrative Agent as promptly
as practicable, with reasonably satisfactory lender’s loss payable
endorsements, naming the First Lien Debt Agent for so long as any First Lien
Debt remains outstanding and thereafter naming Administrative Agent and Lenders
as loss payees, assignees or additional insureds, as appropriate, as its
interest may appear, and showing only such other loss payees, assignees and
additional insureds as are reasonably satisfactory to Administrative
Agent.  Each policy of insurance or
endorsement shall contain a clause requiring the insurer to give not less than
10 days’ prior written notice to Administrative Agent in the event of
cancellation of the policy for nonpayment of premium and not less than 30 days’
prior written notice to Administrative Agent in the event of cancellation of
the policy for any other reason whatsoever and a clause specifying that the
interest of Administrative Agent shall not be impaired or invalidated by any
act or neglect of any Credit Party, any of its Subsidiaries or the owner of the
Property or by the occupation of the premises for purposes more hazardous than
are permitted by said policy.  Borrower
agrees to deliver to Administrative Agent, promptly as rendered, true copies of
all reports made in any reporting forms to insurance companies.  All proceeds of business interruption
insurance (if any) of each Credit Party and its Subsidiaries shall be remitted
to Administrative Agent for application to the outstanding balance of the Term
Loans unless required to be applied to the obligations under the First Lien
Debt Documents.

 

Unless Borrower provides Administrative Agent
with evidence of the insurance coverage required by this Agreement,
Administrative Agent may purchase insurance at Borrower’s expense to protect
Administrative Agent’s interests in the Properties of Credit Parties and their
Subsidiaries.  This insurance may, but
need not, protect the interests of Credit Parties and their Subsidiaries.  The coverage that Administrative Agent
purchases may not pay any claim that any Credit Party or any of its
Subsidiaries makes or any claim that is made against any Credit Party or any
such Subsidiary in connection with said Property.  Credit Parties may later cancel any insurance
purchased by Administrative Agent, but only after providing Administrative
Agent with evidence that Credit Parties and their Subsidiaries have obtained
insurance as required by this Agreement. 
If Administrative Agent purchases insurance, Borrower will be
responsible for the reasonable costs of that insurance, including interest and
any other charges Administrative Agent may impose in connection with the
placement of insurance, until the effective date of the cancellation or
expiration of the insurance.  The costs
of the insurance may be added to the Obligations.  The costs of the insurance may be more than
the cost of insurance that Credit Parties and their Subsidiaries may be able to
obtain on their own.

 

6.1.3                        Protection of Collateral. 
Neither Administrative Agent nor any Lender shall be liable or
responsible in any way for the safekeeping of any of the Collateral or for any
loss or damage thereto (except for reasonable care in the custody thereof while
any Collateral is in Administrative Agent’s or any Lender’s actual possession)
or for any diminution in the value thereof, or for any act or default of any

 

24

 

warehouseman, carrier,
forwarding agency or other person whomsoever, but the same shall be at Credit
Parties’ sole risk.

 

6.2              Administration of Accounts.

 

6.2.1                        Records, Schedules and Assignments
of Accounts.  Each Credit Party shall keep accurate and
complete records of its Accounts and all payments and collections thereon and
shall submit to Administrative Agent on such periodic basis as Administrative
Agent shall reasonably request at any time that an Event of Default shall have
occurred and be continuing a sales and collections report for the preceding
period, in form reasonably acceptable to Administrative Agent.

 

6.2.2                        [Intentionally Omitted].

 

6.2.3                        Account Verification. 
Any of Administrative Agent’s officers, employees or agents shall have
the right, at any time or times hereafter that an Event of Default shall have
occurred and be continuing, in the name of Administrative Agent, any designee
of Administrative Agent or any Credit Party, to verify the validity, amount or
any other matter relating to any Accounts by mail, telephone, electronic
communication or otherwise.  Credit
Parties shall cooperate with Administrative Agent in an effort to facilitate
and promptly conclude any such verification process.

 

6.2.4                        Collection Accounts. 
Each deposit account (other than Excluded Deposit Accounts, unless
otherwise requested by the First Lien Debt Agent) which receives any proceeds
of Collateral shall be maintained by Credit Parties pursuant to lockbox and
blocked account arrangements acceptable to Administrative Agent (each such
account, a “Collection Account”
and collectively, the “Collection Accounts”)
with BofA or such other banks as may be selected by Credit Parties and be
acceptable to Administrative Agent (each bank maintaining a Collection Account,
a “Collection Bank” and
collectively, the “Collection Banks”).  Subject to the terms of the Intercreditor
Agreement, all such blocked account arrangements shall provide for the
Administrative Agent’s and the First Lien Debt’s Agent’s “control” (within the
meaning of the Uniform Commercial Code) of the relevant Collection Accounts,
and if an Event of Default occurs and is continuing, dominion by Administrative
Agent and the First Lien Debt Agent over all cash or other assets deposited
into such accounts.  Subject to the terms
of the Intercreditor Agreement, upon the occurrence of an Event of Default,
Administrative Agent shall be entitled to deliver notice to each Collection
Bank instructing such Collection Bank to comply only with the instructions of
Administrative Agent relating to each Collection Account maintained by such
Collection Bank (each such notice, a “Dominion
Notice”).  On or prior to the
date hereof, Borrower shall deliver to Administrative Agent a control agreement
for each Collection Account maintained as of the Closing Date to provide for
control and springing dominion by Administrative Agent over all assets
deposited therein as described above, each such control agreement to be in form
and substance acceptable to Administrative Agent.  Subject to the terms of the Intercreditor
Agreement, after the occurrence and during the continuance of an Event of
Default, all funds deposited in any Collection Account shall immediately become
the property of Administrative Agent, for the ratable benefit of

 

25

 

Lenders, and Borrower
shall obtain the agreement by each Collection Bank in favor of Administrative
Agent to waive any recoupment, setoff rights, and any security interest in, or
against, the funds so deposited.  Administrative
Agent assumes no responsibility for lockbox and blocked account arrangements,
including, without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder.

 

6.2.5                        Collection of Accounts, Proceeds of
Collateral.  Each Credit Party agrees that all invoices
rendered and other requests made by any Credit Party for payment in respect of
Accounts shall contain a written statement directing payment in respect of such
Accounts to be paid to a lockbox or Collection Account established pursuant to subsection 6.2.4.  To expedite collection, each Credit Party
shall endeavor in the first instance to make collection of its Accounts for
Administrative Agent.  All remittances
received by any Credit Party on account of Accounts, together with the proceeds
of any other Collateral, shall be held as Administrative Agent’s property, for
its benefit and the benefit of Lenders, by such Credit Party as trustee of an
express trust for Administrative Agent’s benefit and such Credit Party shall
immediately deposit same in kind to a Collection Account.  Administrative Agent retains the right at all
times after the occurrence and during the continuance of an Event of Default to
notify Account Debtors that Credit Parties’ Accounts have been assigned to
Administrative Agent and, subject to the terms of the Intercreditor Agreement,
to collect Credit Parties’ Accounts directly in its own name, or in the name of
Administrative Agent’s agent, and to charge the collection costs and expenses,
including attorneys’ fees, to any Credit Party.

 

6.2.6                        Taxes. 
If an Account includes a charge for any tax payable to any governmental
taxing authority, Administrative Agent is authorized, in its sole discretion,
to pay the amount thereof to the proper taxing authority for the account of the
relevant Credit Party and to charge any Credit Party therefor, except for taxes
(i) that are being actively contested in good faith and by appropriate
proceedings and with respect to which the relevant Credit Party maintains
reasonable reserves on its books therefor and (ii) as to which the
imposition of any Lien in respect thereof is stayed during the pendency of such
proceedings.  In no event shall
Administrative Agent or any Lender be liable for any taxes to any governmental
taxing authority that may be due by any Credit Party.

 

6.3              Administration of Inventory.  Credit
Parties shall keep records of their Inventory (including, without limitation,
Rental Equipment Inventory) which records shall be accurate and complete in all
material respects.  Credit Parties’
records of all Rental Equipment Inventory shall be itemized and describe the
kind, type, quality, quantity and book value of such Rental Equipment Inventory
and shall list all dispositions made in accordance with subsection 8.2.8.

 

6.4              Payment of Charges.  All amounts
chargeable to any Credit Party under Section 6 hereof shall be
Obligations secured by all of the Collateral, shall be payable by any Credit
Party on demand and shall bear interest from the date such advance was made
until paid in full at the rate applicable to Base Rate Portions from time to
time.

 

26

 

SECTION 7.  REPRESENTATIONS
AND WARRANTIES

 

7.1              General Representations and Warranties. 
To induce Administrative Agent and each Lender to enter into this
Agreement and to make loans, advances and other extensions of credit hereunder,
each Credit Party warrants, represents and covenants to Administrative Agent
and each Lender, on a joint and several basis, that:

 

7.1.1                        Qualification.  Each Credit
Party and each of its Subsidiaries is a corporation, limited partnership or
limited liability company duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization.  No Credit Party or any Subsidiary thereof is
organized under the laws of more than one jurisdiction.  Each Credit Party and each of its
Subsidiaries is duly qualified and is authorized to do business and is in good
standing as a foreign limited liability company, limited partnership or
corporation, as applicable, in each state or jurisdiction listed on Exhibit 7.1.1
hereto and in all other states and jurisdictions in which the failure of any
Credit Party or any of its Subsidiaries to be so qualified could reasonably be
expected to have a Material Adverse Effect.

 

7.1.2                        Power and Authority.  Each Credit
Party and each of its Subsidiaries is duly authorized and empowered to enter
into, execute, deliver and perform this Agreement and each of the other Loan
Documents to which it is a party.  The
execution, delivery and performance of this Agreement and each of the other
Loan Documents have been duly authorized by all necessary corporate, limited
partnership or limited liability company action, as applicable, and do not and
will not:  (i) require any consent
or approval of the partners, shareholders or members (as applicable) of any
Credit Party or any of the shareholders, partners or members, as the case may
be, of any Subsidiary of any Credit Party; (ii) contravene any Credit
Party’s or any of its Subsidiaries’ charter, articles or certificate of
incorporation, partnership agreement, certificate of formation, by laws,
limited liability agreement, operating agreement or other organizational documents
(as the case may be); (iii) violate, or cause any Credit Party or any of
its Subsidiaries to be in default under, any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
in effect having applicability to such Credit Party or any of its Subsidiaries,
other than any such violation as could not reasonably be expected to have a
Material Adverse Effect; (iv) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which any Credit Party or any of its Subsidiaries is a
party or by which it or its Properties may be bound or affected, the breach of
or default under which could reasonably be expected to have a Material Adverse
Effect; or (v) result in, or require, the creation or imposition of any
Lien (other than Permitted Liens) upon or with respect to any of the Properties
now owned or hereafter acquired by any Credit Party or any of its Subsidiaries.

 

7.1.3                        Legally Enforceable Agreement.  This
Agreement, and each of the other Loan Documents, has been duly executed and
delivered by each Credit Party and each of its Subsidiaries party thereto and
is a legal, valid and binding obligation of each such Credit Party and each such
Subsidiary, enforceable against it in accordance with its respective terms,
except as enforcement may be limited by (i) the effect of any applicable

 

27

 

bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’
rights generally and (ii) general principles of equity.

 

7.1.4                        Capital Structure.  Exhibit 7.1.4
hereto states, as of the date hereof, (i) the correct name of each of the
Subsidiaries of each Credit Party, its jurisdiction of incorporation or
organization and the percentage of its Voting Stock owned by the applicable
Credit Party, (ii) the name of each Credit Party’s and each of its
Subsidiaries’ corporate or joint venture relationships and the nature of the
relationship, (iii) the number, nature and holder of all outstanding
Securities of each Credit Party and the holder of Securities of each Subsidiary
of each Credit Party and (iv) the number of authorized, issued and
treasury Securities of each Credit Party. 
Each Subsidiary of Borrower that is not a Foreign Subsidiary as of the
Closing Date is party to this Agreement as a Subsidiary Guarantor.  Each Credit Party has good title to all of
the Securities it purports to own of each of such Subsidiaries, free and clear
in each case of any Lien other than Permitted Liens.  All such Securities have been duly authorized
and issued and are fully paid and non-assessable to the extent such concepts
are applicable to such types of Securities. 
There are no outstanding options to purchase, or any rights or warrants
to subscribe for, or any commitments or agreements to issue or sell any
Securities or obligations convertible into, or any powers of attorney relating
to any Securities of any Credit Party or any of its Subsidiaries.  Except as set forth on Exhibit 7.1.4,
there are no outstanding agreements or instruments binding upon any of any
Credit Party’s or any of its Subsidiaries’ partners, members or shareholders,
as the case may be, relating to the ownership of its Securities.

 

7.1.5                        Names; Organization.  Neither any
Credit Party nor any of its Subsidiaries has been known as or has used any
legal, fictitious or trade names within 5 years prior to the Closing Date,
except those listed on Exhibit 7.1.5 hereto.  Except as set forth on Exhibit 7.1.5,
within the 5 years prior to the Closing Date, neither any Credit Party nor any
of its Subsidiaries has been the surviving entity of a merger or consolidation
or has acquired all or substantially all of the assets of any Person.  Each of each Credit Party’s and each of its
Subsidiaries’ state(s) of incorporation or organization, Type of Organization
and Organizational I.D. Number is set forth on Exhibit 7.1.5.  The exact legal name of each Credit Party and
each of its Subsidiaries is set forth on Exhibit 7.1.5.

 

7.1.6                        Business Locations; Administrative Agent for Process. 
Each of each Credit Party’s and each of its Subsidiaries’ chief
executive office, location of books and records and other places of business
are as listed on Exhibit 6.1.1 hereto, as updated from time to time
by Borrower in accordance with the provisions of subsection 6.1.1.  Except as shown on Exhibit 6.1.1,
as updated from time to time by Borrower in accordance with the provisions of subsection 6.1.1,
no Inventory is stored with a bailee, distributor, warehouseman or similar
party, nor is any Inventory consigned to any Person.

 

7.1.7                        Title to Properties; Priority of Liens.

 

(i)                                     Each Credit Party and each of its
Subsidiaries has good, indefeasible and marketable title to and fee simple
ownership of, or valid and subsisting

 

28

 

leasehold interests
in, all of its real Property, and good title to all of the Collateral and all
of its other Property, in each case, free and clear of all Liens except
Permitted Liens.  Each Credit Party and
each of its Subsidiaries has paid or discharged all lawful claims which, if
unpaid, might become a Lien against any of such Credit Party’s or such
Subsidiary’s Properties that is not a Permitted Lien.  The Liens granted to Administrative Agent
under Section 5 hereof are second priority Liens, subject only to
Permitted Liens.

 

(ii)                                  Exhibit 7.1.7 sets forth, as of the Closing Date,
a correct and complete list of all real Property owned by each Credit Party and
each of its Subsidiaries and all leases (including capitalized leases) and
subleases of real or personal property held by each Credit Party and each of
its Subsidiaries as lessee or sublessee, or as lessor, or sublessor.  Each of such leases and subleases is valid
and enforceable in accordance with its terms and is in full force and effect,
and no default by any Credit Party or any of its Subsidiaries nor, to any
Credit Party’s knowledge, any other party to any such lease or sublease,
exists.

 

7.1.8                        Accounts.

 

With respect
to each of Credit Parties’ Accounts, unless otherwise disclosed to
Administrative Agent in writing:

 

(i)                                     It is genuine and in all respects
what it purports to be, and it is not evidenced by a judgment;

 

(ii)                                  It arises out of a completed, bona
fide sale and delivery of goods or rendition of services by a Credit
Party, in the ordinary course of its business and in accordance with the terms
and conditions of all purchase orders, contracts or other documents relating
thereto and forming a part of the contract between a Credit Party and the
Account Debtor;

 

(iii)                               It is for a liquidated amount
maturing as stated in the duplicate invoice covering such sale or rendition of
services, a copy of which has been furnished or is available to Administrative
Agent;

 

(iv)                              To Borrowers’ knowledge, there are
no facts, events or occurrences which in any way impair the validity or
enforceability of any Accounts or tend to reduce the amount payable thereunder
from the face amount of the invoice and statements delivered or made available
to Administrative Agent with respect thereto;

 

(v)                                 To Credit Parties’ knowledge, the
Account Debtor thereunder (1) had the capacity to contract at the time any
contract or other document giving rise to the Account was executed and (2) such
Account Debtor is Solvent; and

 

(vi)                              To Credit Parties’ knowledge, there
are no proceedings or actions which are threatened or pending against the
Account Debtor thereunder which might result in any material adverse change in
such Account Debtor’s financial condition or the collectibility of such
Account.

 

29

 

7.1.9                        Nonrental Equipment and Rental Equipment Inventory. 
The Nonrental Equipment and Rental Equipment Inventory of each Credit
Party and its Subsidiaries is in good operating condition and repair, and all
necessary replacements of and repairs thereto shall be made so that the
operating efficiency thereof shall be maintained and preserved, reasonable wear
and tear and casualty events excepted. 
Neither any Credit Party nor any of its Subsidiaries will permit any
Nonrental Equipment or Rental Equipment Inventory to become affixed to any real
Property leased to any Credit Party or any of its Subsidiaries so that an
interest arises therein under the real estate laws of the applicable
jurisdiction unless the landlord of such real Property has executed a landlord
waiver or leasehold mortgage in favor of and in form reasonably acceptable to
Administrative Agent, and no Credit Party will permit any of the Nonrental
Equipment or Rental Equipment Inventory of any Credit Party or any of its
Subsidiaries to become an accession to any personal Property other than
Nonrental Equipment and Rental Equipment Inventory that is subject to second
priority (except for Permitted Liens) Liens in favor of Administrative Agent.

 

7.1.10                  Financial Statements; Fiscal Year. 
The Consolidated and consolidating balance
sheets of Borrower and its Subsidiaries (including the accounts of all
Subsidiaries of Borrower and their
respective Subsidiaries for the respective periods during which a Subsidiary
relationship existed) as of March 31, 2004, and the related statements of
income, cash flow, changes in shareholder’s equity, and changes in financial
position for the periods ended on such dates, have been prepared in accordance
with GAAP, and present fairly in all material respects the financial positions
of Borrower and such Persons,
taken as a whole, at such dates
and the results of Borrower’s and such Persons’ operations, taken as a whole, for such periods.  Since March 31, 2004, there has been no
material adverse change in the business, assets, liabilities (actual or
contingent), operations or financial condition of Borrower and such other
Persons, taken as a whole, as reflected in the Consolidated balance sheet as of
such date.  As of the date hereof, the
fiscal year of each Credit Party and each of its Subsidiaries ends on December 31
of each year.

 

7.1.11                  Full
Disclosure. 
The financial statements referred to in subsection 7.1.10
hereof do not, nor does this Agreement or any other written statement of any
Credit Party to Administrative Agent or any Lender, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein, in light of the circumstances under
which they are made, not misleading as of the time made or delivered.  There is no fact which any Credit Party has
failed to disclose to Administrative Agent or any Lender in writing which could
reasonably be expected to have a Material Adverse Effect.

 

7.1.12                  Solvent Financial Condition.  Giving effect
to subsection 12.2, each Credit Party and each of its Subsidiaries
is, and after giving effect to the Term Loans to be made hereunder and all
related transactions will be, Solvent.

 

7.1.13                  Surety
Obligations. 
Except as set forth on Exhibit 7.1.13, as of the date
hereof, neither any Credit Party nor any of its Subsidiaries is obligated as
surety or indemnitor under any surety or similar bond or other contract or has
issued or entered

 

30

 

into any agreement to
assure payment, performance or completion of performance of any undertaking or
obligation of any Person other than payment, performance or completion of
performance by itself or any Credit Party.

 

7.1.14                  Taxes.  The federal
or other applicable tax identification number of each Credit Party and each of
its Subsidiaries is shown on Exhibit 7.1.14 hereto.  Each Credit Party and each of its
Subsidiaries has filed all federal, state, local and foreign income and other
material tax returns and other reports relating to taxes it is required by law
to file, and has paid, or made provision for the payment of, all federal,
state, local and foreign income and other material taxes, assessments, fees,
levies and other governmental charges upon it, its income and Properties as and
when such taxes, assessments, fees, levies and charges are due and payable,
unless and to the extent any thereof are being actively contested in good faith
and by appropriate proceedings, and the applicable Credit Party or the relevant
Subsidiary maintains reasonable reserves on its books therefor.  The provision for taxes on the books of each
Credit Party and its Subsidiaries is adequate for all years not closed by
applicable statutes, and for the current fiscal year.

 

7.1.15                  Brokers.  Except as
shown on Exhibit 7.1.15 hereto and except as may be payable to
Administrative Agent or the Joint Lead Arrangers, there are no claims for
brokerage commissions, finder’s fees or investment banking fees in connection
with the transactions contemplated by this Agreement.

 

7.1.16                  Patents, Trademarks, Copyrights and
Licenses.  Each Credit Party and each of its
Subsidiaries owns, possesses or licenses or has the right to use all the
patents, trademarks, service marks, trade names, copyrights, licenses and other
Intellectual Property necessary for the present and planned future conduct of
its business without any known conflict with the rights of others, except for
such conflicts as could not reasonably be expected to have a Material Adverse
Effect.  All such patents, trademarks, service
marks, trade names, copyrights, licenses and other similar rights are listed on
Exhibit 7.1.16 hereto.  No
claim has been asserted to any Credit Party or any Subsidiary of any Credit
Party which is currently pending that its use of its Intellectual Property or
the conduct of its business does or may infringe upon the Intellectual Property
rights of any third party.  To the
knowledge of each Credit Party and except as set forth on Exhibit 7.1.16
hereto, as of the date hereof, no Person is engaging in any activity that
infringes in any material respect upon any Credit Party’s or any of its
Subsidiaries’ material Intellectual Property. 
Except as set forth on Exhibit 7.1.16, each Credit Party’s
and each of its Subsidiaries’ (i) material trademarks, service marks and
copyrights are registered with the U.S. Patent and Trademark Office or in the
U.S. Copyright Office, as applicable and (ii) material license agreements
and similar arrangements relating to its Inventory (1) permit, and do not
restrict, the assignment by any Credit Party or any of its Subsidiaries to
Administrative Agent, or any other Person designated by Administrative Agent,
of all of such Credit Party’s or such Subsidiary’s, as applicable, rights,
title and interest pertaining to such license agreement or such similar
arrangement and (2) would permit the continued use by such Credit Party or
such Subsidiary, or Administrative Agent or its assignee, of such license
agreement or such similar arrangement and the right to sell Inventory subject to
such license agreement for a period of no less than 6 months after a default or
breach of such agreement or

 

31

 

arrangement.  The consummation and performance of the
transactions and actions contemplated by this Agreement and the other Loan
Documents, including, without limitation, the exercise by Administrative Agent
of any of its rights or remedies under Section 10, will not result
in the termination or impairment of any of such Credit Party’s or any of its
Subsidiaries’ ownership or rights relating to its Intellectual Property.  Except as listed on Exhibit 7.1.16,
and except as could not reasonably be expected to have a Material Adverse
Effect, (i) neither any Credit Party nor any of its Subsidiaries is in
breach of, or default under, any term of any license or sublicense with respect
to any of its Intellectual Property and (ii) to the knowledge of each
Credit Party, no other party to such license or sublicense is in breach thereof
or default thereunder, and such license is valid and enforceable.

 

7.1.17                  Governmental Consents. 
Each Credit Party and each of its Subsidiaries has, and is in good
standing with respect to, all governmental consents, approvals, licenses,
authorizations, permits, certificates, inspections and franchises necessary to
continue to conduct its business as heretofore or proposed to be conducted by
it and to own or lease and operate its Properties as now owned or leased by it,
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect.

 

7.1.18                  Compliance
with Laws. 
Each Credit Party and each of its Subsidiaries has duly complied, and
its Properties, business operations and leaseholds are in compliance with, the
provisions of all federal, state and local laws, rules and regulations
applicable to such Credit Party or such Subsidiary, as applicable, its
Properties or the conduct of its business, except for such non-compliance as
could not reasonably be expected to have a Material Adverse Effect, and there
have been no citations, notices or orders of noncompliance issued to any Credit
Party or any of its Subsidiaries under any such law, rule or regulation, except
where such noncompliance could not reasonably be expected to have a Material
Adverse Effect.  No Inventory has been
produced in violation of the Fair Labor Standards Act (29 U.S.C. §201 et
seq.), as amended.

 

7.1.19                  Restrictions.  Neither any
Credit Party nor any of its Subsidiaries is a party or subject to any contract
or agreement which restricts its right or ability to incur Indebtedness, other
than as set forth on Exhibit 7.1.19 hereto, none of which prohibit
the execution of or compliance with this Agreement or the other Loan Documents
by any Credit Party or any of its Subsidiaries, as applicable.

 

7.1.20                  Litigation.  Except as set
forth on Exhibit 7.1.20 hereto, there are no actions, suits,
proceedings or investigations pending, or to the knowledge of any Credit Party,
threatened, against or affecting any Credit Party or any of its Subsidiaries,
or the business, operations, Properties, prospects, profits or condition of any
Credit Party or any of its Subsidiaries which, singly or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.  Neither any Credit Party nor any of its
Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal, which, singly or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

 

32

 

7.1.21                  No
Defaults. 
No event has occurred and no condition exists which would, upon or after
the execution and delivery of this Agreement or any Credit Party’s performance
hereunder, constitute a Default or an Event of Default.  Neither any Credit Party nor any of its
Subsidiaries is in default (and no event has occurred and no condition exists
which constitutes, or which with the passage of time or the giving of notice or
both would constitute, a default) under any Material Contract.

 

7.1.22                  Distributions.  Except as
disclosed on Exhibit 7.1.22 and except for Distributions of cash paid to
another Credit Party or pursuant to the Reorganization Plan, as of the Closing
Date, no Distribution of cash has been declared, paid, or made upon or in
respect of any Securities of any Credit Party or any of its Subsidiaries since February 12,
2004.

 

7.1.23                  ERISA
Compliance.  Except as specifically disclosed in Exhibit 7.1.23:

 

(i)                                     Each Plan and Foreign Plan is in
compliance with applicable Requirements of Law including, but not limited to
ERISA and the Code, except for such non-compliance as could not reasonably be
expected to have a Material Adverse Effect. 
Each Plan which is intended to qualify under Section 401(a) of the
Code has received a favorable determination letter from the IRS and to the
knowledge of each Credit Party, nothing has occurred which would cause the loss
of such qualification.  Each Credit Party
and each ERISA Affiliate has made all required contributions to any Pension
Plan, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Pension Plan.

 

(ii)                                  There are no pending or, to the knowledge
of any Credit Party, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan, Multiemployer Plan or Foreign
Plan which has resulted or could reasonably be expected to result in a Material
Adverse Effect.  There has been no
prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan, Multiemployer Plan or Foreign Plan which has resulted or
could reasonably be expected to result in a Material Adverse Effect.

 

(iii)                               Except as could not reasonably be
expected to have a Material Adverse Effect, (A) no ERISA Event has occurred or
is reasonably expected to occur; (B) no Pension Plan has any Unfunded Pension
Liability; (C) no Credit Party nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect
to any Pension Plan (other than premiums due and not delinquent under Section 4007
of ERISA); (D) no Credit Party nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in
such liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; or (E) assets of all Foreign Plans equal or exceed any
liabilities accrued thereunder in accordance with applicable Requirements of
Law.  No Credit Party nor any ERISA

 

33

 

Affiliate has
engaged in a transaction that could reasonably be expected to be subject to Section 4069
or 4212(c) of ERISA.

 

(iv)                              No Credit Party nor any ERISA
Affiliate sponsors or is otherwise required to contribute to any retiree
medical plan, arrangement, contract or policy other than (A) coverage mandated
by Requirement of Law, (B) death benefits or retirement benefits under any
Pension Plan or (C) benefits, the full direct cost of which is borne by the
participating employee or former employee (or beneficiary thereof).

 

7.1.24                  Trade
Relations. 
There exists no actual or, to any Credit Party’s knowledge, threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between any Credit Party or any of its Subsidiaries
and any customer or any group of customers whose purchases individually or in
the aggregate are material to the business of Credit Parties and their
Subsidiaries, or with any material supplier, except, in each case, where the
same could not reasonably be expected to have a Material Adverse Effect, and,
to any Credit Party’s knowledge, there exists no present condition or state of
facts or circumstances which would prevent any Credit Party or any of its
Subsidiaries from conducting such business after the consummation of the
transactions contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted, which prevention could reasonably be
expected to have a Material Adverse Effect.

 

7.1.25                  Labor
Relations. 
Except as described on Exhibit 7.1.25 hereto, as of the date
hereof, neither any Credit Party nor any of its Subsidiaries is a party to any
collective bargaining agreement.  There
are no asserted pending demands for collective bargaining by any union or
organization of any Credit Party’s or any of its Subsidiaries’ employees, or,
to any Credit Party’s knowledge, any material grievances, disputes or
controversies with any such union or other organization, or any threats of
strikes or work stoppages, except those that could not reasonably be expected
to have a Material Adverse Effect.

 

7.1.26                  Related
Businesses. 
As of the Closing Date, Credit Parties are engaged in the businesses of
renting general and specialty equipment to industrial and construction
end-users, as well as selling used equipment and complementary parts, supplies
and merchandise and providing repair and maintenance services to their
customers.  Borrower has requested the
Lenders to make credit available hereunder for the purposes set forth in subsection 1.1.2.  Each Credit Party and each Subsidiary of each
Credit Party expects to derive benefit (and the Board of Directors of each
Credit Party and each Subsidiary of each Credit Party has determined that such
Credit Party or Subsidiary may reasonably be expected to derive benefit),
directly or indirectly, from the credit extended by Lenders hereunder to
Borrower, both in its separate capacity and as a member of the group of
companies, since the successful operation and condition of each Credit Party
and each Subsidiary of each Credit Party is dependent on the continued
successful performance of the functions of the group as a whole.  Each Credit Party acknowledges that, but for
the agreement of each of the other Credit Parties to execute and deliver this
Agreement, Administrative Agent and Lenders would not have made available the
credit facilities established hereby on the terms set forth herein.

 

 

34

 

7.1.27                  Margin Regulations.  No Credit
Party nor any Subsidiary of any Credit Party is engaged in the business of
purchasing or selling Margin Stock or extending credit for the purpose of
purchasing or carrying Margin Stock.

 

7.1.28                  Regulated
Entities. 
No Credit Party, no Person controlling any Credit Party, nor any
Subsidiary of any Credit Party, is an “Investment Company” within the meaning
of the Investment Company Act of 1940. 
No Credit Party is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce
Act, any state public utilities code or law, or any other federal or state
statute or regulation limiting its ability to incur indebtedness.

 

7.1.29                  Environmental
Laws. 
Except as otherwise disclosed on Exhibit 7.1.29 and except for
any of the following as could not reasonably be expected to have a Material
Adverse Effect:

 

(i)                                     Each Credit Party and its
Subsidiaries have complied with all Environmental Laws and neither any Credit
Party nor any of its Subsidiaries nor any of its presently owned real property
or presently conducted operations, nor its previously owned real property or
prior operations, is subject to any pending or threatened Environmental Claim
or any enforcement order from or liability agreement with any Governmental
Authority or private Person respecting (A) compliance with any Environmental
Law or (B) any potential liabilities and costs or remedial action arising from
the Release or threatened Release of a Contaminant.

 

(ii)                                  Each Credit Party and its
Subsidiaries have obtained all permits necessary for their current operations
under Environmental Laws, and all such permits are in good standing and each
Credit Party and its Subsidiaries are in compliance with all material terms and
conditions of such permits.

 

(iii)                               Neither any Credit Party nor any of
its Subsidiaries, nor, to the best of such Credit Party’s knowledge, any of its
predecessors in interest, has in violation of applicable law stored, treated or
disposed of any hazardous waste.

 

(iv)                              Neither any Credit Party nor any of
its Subsidiaries has received any summons, complaint, order or similar written
notice indicating that it is not currently in compliance with, or that any
Governmental Authority is investigating its compliance with, any Environmental
Laws or that it is or may be liable to any other Person as a result of a Release
or threatened Release of a Contaminant.

 

(v)                                 To the best of each Credit Party’s
knowledge, none of the present or past operations or Properties of any Credit
Party or its Subsidiaries is the subject of any investigation by any
Governmental Authority evaluating whether any remedial action is needed to
respond to a Release or threatened Release of a Contaminant, and to the best of
each Credit Party’s knowledge, there are no facts or circumstances at any such
Property that would warrant such remedial action.

 

 

35

 

(vi)                              There is not now, nor to the best of
any Credit Party’s knowledge has there ever been on or in the real Properties
of any Credit Party or its Subsidiaries:

 

(A)           any underground storage tanks or
surface impoundments,

 

(B)             any asbestos-containing material, or

 

(C)             any polychlorinated biphenyls (PCBs)
used in hydraulic oils, electrical transformers or other equipment.

 

(vii)                           Neither any Credit Party nor any of
its Subsidiaries has filed any notice under any requirement of Environmental
Law reporting a spill or accidental and unpermitted Release or discharge of a
Contaminant into the environment.

 

(viii)                        Neither any Credit Party nor any of
its Subsidiaries has entered into any negotiations or settlement agreements
with any Person (including the prior owner of its property) imposing material
obligations or liabilities on such Credit Party or any of its Subsidiaries with
respect to any remedial action in response to the Release of a Contaminant or
environmentally related claim.

 

(ix)                                None of the products manufactured,
distributed or sold by any Credit Party or any of its Subsidiaries contain
asbestos containing material.

 

(x)                                   No Environmental Lien has attached
to any of the real Properties of any Credit Party or its Subsidiaries.

 

7.1.30                  Motor
Vehicles. 
As of the Closing Date, Exhibit 7.1.30 sets forth a complete and
accurate list of all Motor Vehicles owned by any Credit Party or any of its
Subsidiaries, together with a good faith estimate of the current value of such
Motor Vehicles.

 

7.1.31                  Anti-Terrorism
Laws.

 

(i)                                     General. 
None of the Credit Parties, nor any of their Subsidiaries or Affiliates
is in violation of any Anti-Terrorism Law or engages in or conspires to engage
in any transaction that evades or avoids, or has the purpose of evading or
avoiding, or attempts to violate, any Anti-Terrorism Law.

 

(ii)                                  Executive Order No. 13224. 
None of the Credit Parties, nor any of their Subsidiaries or Affiliates
is any of the following (each a “Blocked
Person”):

 

(A)                         a Person owned or controlled by, or
acting for or on behalf of, any Person that is listed in the annex to, or is
otherwise subject to the provisions of, Executive Order No. 13224;

 

36

 

(B)                           a Person or entity with which any
bank or other financial institution is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law;

 

(C)                           a Person or entity that commits,
threatens or conspires to commit or supports “terrorism” as defined in
Executive Order No. 13224;

 

(D)                          a Person or entity that is named as
a “specially designed national” on the most current list published by the U.S.
Treasury Department Office of Foreign Asset Control at its official website or
any replacement website or other replacement official publication of such list;
or

 

(E)                            a Person or entity who is affiliated
with a Person or entity listed above.

 

None of the Credit Parties, nor any of their Subsidiaries or Affiliates
(i) conducts any business or engages in making or receiving any contribution of
funds, goods or services to or for the benefit of any Blocked Person or (ii)
deals in, or otherwise engages in any transaction relating to, any property or
interests in property blocked pursuant to Executive Order No. 13224.

 

7.1.32                  Deposit and Brokerage Accounts.  Exhibit 7.1.32 sets forth as of the Closing Date a
complete and accurate list of all deposit, checking and other bank accounts,
all securities and other accounts maintained with any securities intermediary or
broker dealer and all other similar accounts maintained by each Credit
Party and its Subsidiaries, together with a description thereof (i.e.,
the bank, securities intermediary or broker dealer at which such deposit or
other account is maintained and the account number and the purpose
thereof).  No Credit Party or any of its
Subsidiaries maintains any other bank, securities or other similar accounts
other than those set forth on Exhibit 7.1.32.

 

7.2              [Intentionally Omitted].

 

7.3              Survival of Representations and Warranties. 
All representations and warranties of Credit Parties contained in this
Agreement or any of the other Loan Documents shall survive the execution,
delivery and acceptance thereof by Administrative Agent and each Lender and the
parties thereto and the closing of the transactions described therein or
related thereto.

 

SECTION 8.  COVENANTS AND
CONTINUING AGREEMENTS

 

8.1              Affirmative Covenants.  During the
Term, and thereafter for so long as there are any Obligations (other than
unasserted contingent indemnification obligations that are not then due and
payable, whether by acceleration, termination or otherwise) outstanding, each
Credit Party covenants that it shall, and shall cause each of its Subsidiaries
to:

 

37

 

8.1.1                        Visits and Inspections; Appraisals of Rental Equipment Inventory; Lender Meeting.

 

(i)                                     Permit (A) representatives of
Administrative Agent, from time to time, as often as may be reasonably
requested, but only during normal business hours, to conduct Audits (not to
exceed four (4) times per year if such Audit is to be at the expense of
Borrower, unless an Event of Default has occurred and is continuing) and
(B) appraisers engaged pursuant to subsection 2.9 and clause
(ii) of this subsection 8.1.1 (whether or not personnel of Administrative Agent), from time to
time, as provided in such subsection and clause, but only during normal
business hours, to visit and inspect the Properties of each Credit Party and
each of its Subsidiaries, for the purpose of completing appraisals pursuant to subsection 2.9
and clause (ii) of this subsection 8.1.1.  Administrative Agent, if no Default or Event
of Default then exists, shall give Credit Parties reasonable prior notice of
any such Audit or appraisals.  Without
limiting the foregoing, upon the request of Administrative Agent, Credit
Parties will participate and will cause their key management personnel to
participate in meetings with Administrative Agent and Lenders periodically
during each year during regular business hours and upon reasonable prior
notice, which meeting(s) shall be held at such times and such places as may be
reasonably requested by Administrative Agent. 
All Audits and appraisals conducted pursuant to this clause (i) shall
(except as expressly provided above) be at Borrower’s expense.

 

(ii)                                  On or before the 60th day after the
end of each of Borrower’s fiscal quarters, commencing with the fiscal quarter
ending September 30, 2004, deliver to Administrative Agent an appraisal of
each type of Rental Equipment Inventory (both serialized and non-serialized)
performed by an appraiser selected by Borrower (or, if a similar report is then
required to be delivered pursuant to the First Lien Loan and Security
Agreement, by the First Lien Debt Agent), which appraisal shall state the Gross
Orderly Liquidation Value of all such Rental Equipment Inventory.  All inventory appraisals conducted pursuant
to this clause (ii) shall be at Borrower’s expense.

 

8.1.2                        Notices.  Furnish to
Administrative Agent,

 

(i)                                     promptly after the occurrence
thereof, written notice of (A) the occurrence of any event or the existence of
any fact which renders any representation or warranty in this Agreement or any
of the other Loan Documents inaccurate, incomplete or misleading in any
material respect as of the date made and (B) any change in the information
disclosed in any Exhibit hereto, in each case after giving effect to the
materiality limits and Material Adverse Effect qualifications contained
therein;

 

(ii)                                  promptly, and in any event within
three (3) Business Days after a Responsible Officer of any Credit Party has
knowledge of the occurrence of an Event of Default or Default that is
continuing or the occurrence of any event or development that could reasonably
be expected have a Material Adverse Effect, the written statement of a
Responsible Officer of Borrower setting forth the details of such Event of
Default or Default or other event or development having a Material Adverse
Effect and the action which the affected Person proposes to take with respect
thereto;

 

38

 

(iii)                               promptly after the sending or filing
thereof, as the case may be, copies of any proxy statements, financial
statements or reports which Borrower has
made generally available to its Securities holders and copies of any regular,
periodic and special reports or registration statements which Borrower or any
of its Subsidiaries files with the Securities and Exchange Commission or any
Governmental Authority which may be substituted therefor or any national
securities exchange;

 

(iv)                              promptly after receipt thereof,
copies of any material notice or communication received by any Credit Party or
any of its Subsidiaries from any Governmental Authority (including the Securities
and Exchange Commission), and promptly after the commencement thereof but in
any event not later than five (5) Business Days after service of process with
respect thereto, or the obtaining of knowledge thereof by, any Credit Party or
any of its Subsidiaries, notice of each action, suit or proceeding before any
court or other Governmental Authority or other regulatory body or any
arbitrator which, if adversely determined, could reasonably be expected to have
a Material Adverse Effect;

 

(v)                                 within five (5) Business Days after
any Credit Party or any ERISA Affiliate knows or has reason to know, that an
ERISA Event or a non-exempt prohibited transaction (as defined in Sections 406
of ERISA and 4975 of the Code) has occurred, notice thereof and, when known,
any action taken or threatened by the IRS, the DOL or the PBGC with respect
thereto;

 

(vi)                              upon request, or, in the event that
such filing reflects a significant change with respect to the matters covered
thereby, within five (5) Business Days after the filing thereof with the PBGC,
the DOL or the IRS, as applicable, copies of the following:  (A) each annual report (Form 5500 series),
including Schedule B thereto, filed with the PBGC, the DOL or the IRS with
respect to each Pension Plan and (B) a copy of each funding waiver request
filed with the PBGC, the DOL or the IRS with respect to any Pension Plan and
all communications received by any Credit Party or any ERISA Affiliate from the
PBGC, the DOL or the IRS with respect to such request;

 

(vii)                           upon request, copies of each
actuarial report for any Pension Plan; and within five (5) Business Days after
receipt thereof by any Credit Party or any ERISA Affiliate, copies of the
following:  (A) any notices of the PBGC’s
intention to terminate a Pension Plan or to have a trustee appointed to
administer such Pension Plan; (B) any unfavorable determination letter from the
IRS regarding the qualification of a Pension Plan under Section 401(a) of
the Code; (C) any notice from a Multiemployer Plan regarding the imposition of
withdrawal liability; or (D) any notice from a Governmental Authority
regarding the termination, registration or other event affecting a Foreign Plan
which could reasonably be expected to have a Material Adverse Effect;

 

(viii)                        within five (5) Business Days after
the occurrence thereof, notice of: (A) any changes in the benefits or funding
of any existing Pension Plan or Foreign Plan which increase any Credit Party’s
annual costs with respect thereto by an amount in excess of $250,000; or (B)
any failure by any Credit Party or any ERISA

 

 

39

 

Affiliate to
make a required installment or any other required payment under Section 412
of the Code on or before the due date for such installment or payment;

 

(ix)                                within five (5) Business Days after
any Credit Party or any ERISA Affiliate knows or has reason to know that any of
the following events has or will occur, notice thereof:  (A) a Multiemployer Plan has been or will be
terminated; (B) the administrator or plan sponsor of a Multiemployer Plan
intends to terminate a Multiemployer Plan; or (C) the PBGC has instituted or
will institute proceedings under Section 4042 of ERISA to terminate a
Multiemployer Plan;

 

(x)                                   promptly after the receipt or
delivery thereof, copies of all statements, reports and other information any
Credit Party or any of its Subsidiaries sends to or receives from any holder of
the First Lien Debt or any agent or other representative in respect thereof;

 

(xi)                                promptly after receiving any notice
of any violation by any Credit Party or any of its Subsidiaries of any
Environmental Law which could reasonably be expected to have a Material Adverse
Effect or that any Governmental Authority has asserted in writing that any
Credit Party or any Subsidiary is not in compliance with any Environmental Law
or is investigating any Credit Party’s or such Subsidiary’s compliance
therewith, copies thereof;

 

(xii)                             promptly after receiving any written
notice that any Credit Party or any of its Subsidiaries is or may be liable to
any Person as a result of the Release or threatened Release of any Contaminant
or that any Credit Party or any Subsidiary is subject to investigation by any
Governmental Authority evaluating whether any remedial action is needed to respond
to the Release or threatened Release of any Contaminant which, in either case,
could reasonably be expected to have a Material Adverse Effect, copies of such
notice;

 

(xiii)                          promptly after receiving any written
notice of the imposition of any Environmental Lien against any property of any
Credit Party or any of its Subsidiaries, copies of such notice;

 

(xiv)                         at least 10 days prior to the
consummation of any sale or other disposition of any Inventory of any Credit
Party or any of its Subsidiaries (or the consummation of any related series of
sales or dispositions, including any sale or other disposition at auction or
pursuant to a trade package with an original equipment manufacturer) which has
an aggregate book value or fair market value (whichever is greater) in excess
of $5,000,000, notice thereof, which notice shall identify the Inventory to be
sold, the proposed buyer and the details of such transaction; and

 

(xv)                            such other data and information
(financial and otherwise) as Administrative Agent or any Lender, from time to
time, may reasonably request, bearing upon or related to the Collateral or
Credit Parties’ or any of their Subsidiaries’ financial condition or results of
operations.

 

40

 

8.1.3                        Financial Statements and Financial Information.

 

(i)                                     Keep and maintain (A) adequate
records and books of account with respect to its business activities in which
proper entries are made in accordance with customary accounting practices
reflecting all its financial transactions so as to provide reasonable
assurances that transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP; and (B) effective disclosure
controls and procedures designed to ensure that 
material information relating to the Credit Parties and their
Subsidiaries is made known to Borrower and its officers in a timely manner; and

 

(ii)                                  cause to be prepared and furnished
to Administrative Agent and each Lender the following, all to be prepared in
accordance with GAAP applied on a consistent basis, unless Borrower’s certified
public accountants concur in any change therein and  such change is disclosed to Administrative
Agent and is consistent with GAAP:

 

(A)           not later than 90 days after the close of each fiscal
year of Borrower, unqualified (except for a qualification for a change in
accounting principles with which the accountant concurs) audited Consolidated
and consolidating (on a line of
business basis) balance sheets of Borrower and its Subsidiaries (including the
accounts of all Subsidiaries of Borrower and
their respective Subsidiaries for the respective periods during which a
Subsidiary relationship existed) as of the end of such year, together with the
related statements of income, cash flow, changes in shareholder’s equity, and
changes in financial position for the periods ended on such date, which do not
contain any paragraph of emphasis or explanatory note relating to the ability
of Borrower and its Subsidiaries to continue business as a going concern, and
are certified by KPMG, LLP or another firm of independent certified public
accountants of recognized national standing and, within a reasonable time
thereafter a copy of any management letter issued in connection therewith;

 

(B)             not later than 45 days after the end of each fiscal
quarter of Borrower occurring
after the Closing Date, including the last fiscal quarter of Borrower’s fiscal
year, unaudited interim Consolidated and consolidating (on a line of business basis) balance
sheets of Borrower and its Subsidiaries (including the accounts of all
Subsidiaries of Borrower and their
respective Subsidiaries for the respective periods during which a Subsidiary
relationship existed) as of the end of such quarter, together with the related
statements of income, cash flow, changes in shareholder’s equity, and changes
in financial position for the periods ended on such date and for the portion of
the fiscal year then elapsed, certified by the chief financial officer of
Borrower, in such officer’s capacity as such, as prepared in accordance with
GAAP applied consistently with the

 

41

 

audited
financial statements required to be delivered pursuant to subsection 8.1.3(ii)(A)
and fairly presenting in all material respects the financial position and
results of operations of Borrower and its Subsidiaries for such quarter and
period subject only to changes from audit and year-end adjustments and except
that such statements need not contain notes;

 

(C)             not later than 30 days after the end of each fiscal
month of Borrower occurring after
the Closing Date, including the last fiscal month of Borrower’s fiscal year,
unaudited interim Consolidated balance sheets of Borrower and its Subsidiaries
(including the accounts of all Subsidiaries of Borrower and their respective Subsidiaries for the
respective periods during which a Subsidiary relationship existed) as of the
end of such month, together with the related statements of income and cash flow
setting forth, in each case, in comparative form the figures for the
corresponding date or period of the immediately preceding fiscal year and of
the Projections, certified by the chief financial officer of Borrower, in such officer’s capacity as such, as
prepared in accordance with GAAP applied consistently with the audited
financial statements required to be delivered pursuant to subsection 8.1.3(ii)(A)
and fairly presenting in all material respects the financial position and
results of operations of Borrower and its Subsidiaries for such month subject
only to changes from audit, quarterly and year-end adjustments and except that
such statements need not contain notes;

 

(D)            together with each delivery of financial statements
(1) pursuant to the foregoing clauses (A), (B) and (C), a compliance
certificate in the form of Exhibit 8.1.3(iv) hereto executed by the
chief financial officer of Borrower (a “Compliance
Certificate”); and (2) together with the financial information
delivered pursuant to the forgoing clause (B) (or upon Administrative Agent’s
request from time to time) a list of all contracts entered into by any Credit
Party or any of its Subsidiaries with surety, bonding, indemnity or similar
entities since the date that the last Compliance Certificate was delivered
pursuant hereto, pursuant to which any performance, surety or similar bonds
have been issued for the account of any Credit Party or any of its
Subsidiaries, which list identifies any portion thereof that is cash
collateralized.  In addition, upon
Administrative Agent’s request, each Credit Party shall deliver to
Administrative Agent copies of any bonds issued pursuant to such agreements set
forth in clause (2); and

 

(E)              together with the delivery of the financial statements
described in subsection 8.1.3(ii)(A), Borrower shall forward to
Administrative Agent a copy of the accountants’ letter

 

42

 

to
Borrower’s management that is
prepared in connection with such financial statements.

 

8.1.4                        Collateral Coverage Certificates. 
On or before any date on which any Credit Party creates, incurs or
assumes any First Lien Debt (other than as a result of any borrowing of
revolving credit loans or any issuance of letters of credit), Borrower shall
deliver to Administrative Agent a certificate in the form of Exhibit 8.1.4
hereto executed by the chief financial officer of the Borrower and dated as of
the date of such creation, incurrence or assumption, together with any
supporting documentation Administrative Agent may reasonably request (which may
include information delivered to the First Lien Debt Agent in connection with
the First Lien Loan and Security Agreement).

 

8.1.5                        Landlord, Processor and Storage
Agreements.  Provide Administrative Agent with copies of
all agreements between any Credit Party or any of its Subsidiaries and any
landlord, warehouseman, processor, distributor or consignee which owns or is
the lessee of any premises at which any Collateral may, from time to time, be
kept.  With respect to any lease (other
than leases for sales offices), warehousing agreement or any processing
agreement in any case entered into after the Closing Date, Credit Parties shall
provide Administrative Agent with landlord waivers, bailee letters or processor
letters with respect to such premises. 
Such landlord waivers, bailee letters or processor letters shall be in a
form supplied by Administrative Agent to Credit Parties with such reasonable
revisions as are customarily accepted by Administrative Agent or by similar
financial institutions in similar financial transactions.

 

8.1.6                        Projections.  No later than
30 days prior to the end of the last day of each fiscal year of Borrower,
deliver to Administrative Agent Projections of Borrower and each of its
Subsidiaries on a Consolidated basis (including on a line of business basis)
for the forthcoming fiscal year, month by month.

 

8.1.7                        Additional Credit Parties.  Upon any
Person becoming a direct or indirect Subsidiary of any Credit Party (or upon
any Person ceasing to be a Foreign Subsidiary of any Credit Party while
remaining a Subsidiary of any Credit Party), (a) cause such Person (excluding
any Foreign Subsidiary) to become a “Subsidiary Guarantor” and “Credit Party”
hereunder, jointly and severally with the other Subsidiary Guarantors, pursuant
to a joinder agreement or other supplement hereto in form and substance
reasonably satisfactory to Administrative Agent, (b) cause such Person
(excluding any Foreign Subsidiary) to pledge all of its assets to
Administrative Agent on a second priority basis (subject only to Permitted
Liens) pursuant to this Agreement or a separate security agreement in form and
substance reasonably satisfactory to Administrative Agent, (c) cause all of
such Person’s Securities (or in the case of any Foreign Subsidiary, sixty-five
percent (65%) of its Securities entitled to vote and 100% of its non-voting
Securities) to be pledged and delivered to Administrative Agent pursuant to a
pledge agreement in form and substance reasonably satisfactory to
Administrative Agent (together with undated stock powers signed in blank), (d)
cause such Person (excluding any Foreign Subsidiary) to grant a mortgage in and
to all of such Person’s owned real Property in accordance with subsection 5.4,
and (e) deliver such other

 

43

 

documentation as
Administrative Agent may reasonably request in connection with the foregoing,
including, without limitation, certified resolutions and other organizational
and authorizing documents of such Person and favorable opinions of counsel to
such Person (which shall cover, among other things, the legality, validity,
binding effect and enforceability of the documentation referred to above), all
in form, content and scope reasonably satisfactory to Administrative Agent.

 

8.1.8                        ERISA.  (i) Maintain, and cause
each of its ERISA Affiliates to maintain, each Pension Plan and Foreign Plan in
compliance in all material respects with the Requirement of Law, including, but
not limited to ERISA, the Code and other federal or state law; (ii) cause, and
cause each of its ERISA Affiliates to cause, each Plan which is qualified under
Section 401(a) of the Code to maintain such qualification; (iii) make, and
cause each of its ERISA Affiliates to make, all required contributions to any
Plan subject to Section 412 of the Code; (iv) not engage, and cause each
of its ERISA Affiliates not to engage, in a prohibited  transaction or violation of the fiduciary
responsibility rules with respect to any Plan or Foreign Plan and (v) not
engage, and cause each of its ERISA Affiliates not to engage, in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.

 

8.1.9                        Environmental Laws.

 

(i)                                     Conduct, and cause each Credit Party
to conduct, its business in compliance with all Environmental Laws applicable
to it, including those relating to the generation, handling, use, storage, and
disposal of any Contaminant; take, and cause each of its Subsidiaries to take,
prompt and appropriate action to respond to any non-compliance with Environmental
Laws (or any Release), and regularly report to Administrative Agent on such
response.

 

(ii)                                  Without limiting the generality of
the foregoing, submit to Administrative Agent and Lenders annually, commencing
on the first anniversary of the Closing Date, and on each anniversary thereof
thereafter, an update of the status of each environmental compliance or
liability issue.  Administrative Agent or
any Lender may request copies of technical reports prepared by any Credit Party
and its communications with any Governmental Authority to determine whether any
Credit Party or any of its Subsidiaries is proceeding reasonably to correct,
cure or contest in good faith any alleged non-compliance or environmental
liability.  Credit Parties shall, at
Administrative Agent’s or Majority Lenders’ request and at Credit Parties’
expense, (A) retain an independent environmental engineer acceptable to
Administrative Agent  to evaluate the
site, including tests if appropriate, where the non-compliance or alleged
non-compliance with Environmental Laws has occurred and prepare and deliver to
Administrative Agent, in sufficient quantity for distribution by Administrative
Agent to Lenders, a report setting forth the results of such evaluation, a
proposed plan for responding to any environmental problems described therein,
and an estimate of the costs thereof, and (B) provide to Administrative Agent
and Lenders a supplemental report of such engineer whenever the scope of the
environmental problems, or the response thereto or the estimated costs thereof,
shall increase in any material respect.

 

44

 

(iii)                               Administrative Agent and its
representatives will have the right at any reasonable time to enter and visit
the real Properties and any other place where any property of any Credit Party
is located for the purposes of observing the real Property, taking and removing
soil or groundwater samples, and conducting tests on any part of the real
Property.  Administrative Agent is under
no duty, however, to visit or observe the real Properties or to conduct tests,
and any such acts by Administrative Agent will be solely for the purposes of
protecting Administrative Agent’s Liens in the Collateral and preserving
Administrative Agent’s and Lenders’ rights under the Loan Documents.  No site visit, observation or testing by
Administrative Agent and Lenders will result in a waiver of any default of any
Credit Party or impose any liability on Administrative Agent or Lenders.  In no event will any site visit, observation
or testing by Administrative Agent be a representation that hazardous
substances are or are not present in, on or under the real Properties, or that
there has been or will be compliance with any Environmental Law.  Neither any Credit Party nor any other party
is entitled to rely on any site visit, observation or testing by Administrative
Agent.  Administrative Agent and Lenders
owe no duty of care to protect any Credit Party or any other party against, or
to inform any Credit Party or any other party of, any hazardous substances or
any other adverse condition affecting the real Properties.  Administrative Agent may in its sole
discretion disclose to any Credit Party or to any other party if so required by
law any report or findings made as a result of, or in connection with, any site
visit, observation or testing by Administrative Agent.  Each Credit Party understands and agrees that
Administrative Agent makes no warranty or representation to any Credit Party or
any other party regarding the truth, accuracy or completeness of any such
report or findings that may be disclosed. 
Each Credit Party also understands that depending on the results of any
site visit, observation or testing by Administrative Agent and disclosed to any
Credit Party, such Credit Party may have a legal obligation to notify one or
more environmental agencies of the results, that such reporting requirements
are site-specific, and are to be evaluated by such Credit Party without advice
or assistance from Administrative Agent. 
In each instance, Administrative Agent will give Borrower or the other
applicable Credit Party reasonable notice before entering the real Properties
or any other place Administrative Agent is permitted to enter under this subsection 8.1.9.  Administrative Agent will make reasonable
efforts to avoid interfering with any Credit Party’s use of the real Properties
or any other property in exercising any rights provided hereunder.

 

8.2         Negative Covenants.  During the
Term, and thereafter for so long as there are any Obligations (other than
unasserted contingent indemnification obligations that are not then due and
payable, whether by acceleration, termination or otherwise) outstanding, each
Credit Party covenants that it shall not, and shall not permit any of its Subsidiaries
to:

 

8.2.1                        Mergers; Consolidations; Acquisitions;
Structural Changes.  Merge or consolidate with any Person; nor
change its or any of its Subsidiaries’ state of incorporation or organization,
Type of Organization or Organizational I.D. Number; nor change its or any of
its Subsidiaries’ legal name; nor acquire all or any substantial part of the
Properties of any Person, except for:

 

45

 

(i)                                     (A) mergers of any Subsidiary of a
Credit Party that is not a Subsidiary Guarantor into any  Credit Party that is not a Subsidiary
Guarantor and (B) mergers of any Subsidiary Guarantor into any other Subsidiary
Guarantor or into Borrower; and

 

(ii)                                  acquisitions of assets that
constitute Capital Expenditures.

 

8.2.2                        Loans.  Make any loans or other
advances of money to any Person, other than (i) for salary, travel
advances, advances against commissions and other similar advances to employees
in the ordinary course of business, (ii) extensions of trade credit in the
ordinary course of business, (iii) deposits with financial institutions
permitted under this Agreement, (iv) prepaid expenses,
(v) intercompany loans between
any Credit Party and any other Credit Party, (vi) deposits permitted to be made
by subsection 8.2.5(vi), (vii) promissory notes received as
consideration in connection with the asset dispositions permitted under subsection 8.2.8(viii)
and (viii) to the extent constituting a loan or advance, rental agreements that
contain options granted to customers of Credit Parties to the extent such
rental agreements are entered into in the ordinary course of business and
consistent with past practices, and so long as (x) customers may purchase the
Rental Equipment Inventory rented by such customers at the expiration of the
applicable rental term at a purchase price not less than the fair market value
of such Rental Equipment Inventory and (y) at all times prior to the payment of
such purchase price, the applicable Credit Party retains full legal and
beneficial ownership of the applicable Rental Equipment Inventory.

 

8.2.3                        Total Indebtedness.  Create,
incur, assume, or suffer to exist, any Indebtedness, except:

 

(i)                                     Obligations owing to Administrative
Agent or any Lender under this Agreement or any of the other Loan Documents;

 

(ii)                                  Indebtedness existing on the date of
this Agreement and listed on Exhibit 8.2.3;

 

(iii)                               Permitted Purchase Money
Indebtedness;

 

(iv)                              contingent liabilities arising out
of endorsements of checks and other negotiable instruments for deposit or collection
in the ordinary course of business;

 

(v)                                 guaranties of any Indebtedness
permitted hereunder;

 

(vi)                              Indebtedness in respect of
intercompany loans permitted under subsection 8.2.2(v);

 

(vii)                           obligations to pay Rentals permitted
by subsection 8.2.17;

 

46

 

(viii)                        to the extent not included above,
trade payables, accruals and accounts payable in the ordinary course of
business (in each case to the extent not overdue) not for Money Borrowed;

 

(ix)                                the First Lien Debt, and extensions
of maturity, refinancing or modification of the terms thereof, but only to the
extent permitted by subsection 8.2.6; provided that (A) the
aggregate outstanding principal amount of First Lien Debt (with letters of
credit issued thereunder being deemed to have a principal amount equal to the
maximum potential liability of Borrower or any of its Subsidiaries thereunder)
at any time outstanding shall not exceed $350,000,000 less the aggregate amount
of (x) all Net Cash Proceeds of asset sales or other dispositions or
casualty or condemnation events, incurrences or issuances of additional
Indebtedness (other than any Indebtedness that refinances the First Lien Debt
outstanding on such date in its entirety) or issuances of additional equity and
(y) amounts resulting from an excess cash flow sweep or similar concept, in the
case of each of clauses (x) and (y), that are applied by Borrower or any of its
Subsidiaries after the Closing Date to repay, whether optionally or
mandatorily, any term First Lien Debt or to repay, whether optional or
mandatorily, any revolving credit First Lien Debt and effect a corresponding
commitment reduction with respect thereto, and (B) Borrower shall not create,
incur or assume First Lien Debt (other than Permitted Overadvances) if, after
giving effect to such creation, incurrence or assumption, the Collateral
Coverage Ratio would exceed 1.00 to 1.00;

 

(x)                                   Indebtedness arising under
performance and surety bonds in the ordinary course of business;

 

(xi)                                Indebtedness incurred to finance the
unpaid portion of annual insurance premiums payable by Credit Parties and their
Subsidiaries in the ordinary course of business, provided, that the aggregate
principal amount of such Indebtedness does not exceed at any time $4,000,000;

 

(xii)                             Indebtedness in respect of
Derivative Obligations and other Product Obligations, in each case, incurred in
the ordinary course of business and not for speculative purposes; and

 

(xiii)                          Indebtedness not included in clauses
(i) through (xii) above which does not exceed at any time $7,500,000
in aggregate principal amount.

 

8.2.4                        Affiliate Transactions.  Enter into,
or be a party to, any transaction with any Affiliate of any Credit Party or any
holder of any Securities of any Credit Party or any Subsidiary of any Credit
Party (other than any other Credit Party), including without limitation in
respect of any management, consulting or similar fees, unless such transaction
meets each of the following conditions: (i) such transaction is in the ordinary
course of and pursuant to the reasonable requirements of such Credit Party’s or
such Subsidiary’s business and upon fair and reasonable terms which are no less
favorable to such Credit Party or such Subsidiary than would be obtained in a
comparable arms-length transaction with a Person not an Affiliate or Security
holder of any Credit Party, provided that if such transaction involves
consideration in excess of $7,500,000 and a Credit Party

 

47

 

has knowledge that
the other party or parties to such transaction are Affiliates of Credit Parties
or their Subsidiaries, Credit Parties shall fully disclose the terms of such
transaction to Administrative Agent prior to the consummation thereof and
(ii) such transaction is otherwise permitted under Section 8
of this Agreement.

 

8.2.5                        Limitation on Liens.  Create or
suffer to exist any Lien upon any of its Property, income or profits, whether
now owned or hereafter acquired, except:

 

(i)                                     Liens at any time granted in favor
of Administrative Agent for the benefit of Administrative Agent and Lenders;

 

(ii)                                  Liens for taxes, assessments or
governmental charges (excluding any Lien imposed pursuant to any of the
provisions of ERISA and any Environmental Lien) not yet due, or being contested
in the manner described in subsection 7.1.14 hereto, but only if in
Administrative Agent’s judgment such Lien would not reasonably be expected to
adversely effect Administrative Agent’s rights or the priority of
Administrative Agent’s Lien on any Collateral;

 

(iii)                               Liens arising in the ordinary course
of the business of any Credit Party or any of its Subsidiaries by operation of
law or regulation, but only if payment in respect of any such Lien is not at
the time required and such Liens do not, in the aggregate, materially detract
from the value of the Property of such Credit Party or any of its Subsidiaries
or materially impair the use thereof in the operation of the business of such
Credit Party or any of its Subsidiaries;

 

(iv)                              Purchase Money Liens securing
Permitted Purchase Money Indebtedness;

 

(v)                                 such other Liens existing on the
Closing Date and as appear on Exhibit 8.2.5 hereto;

 

(vi)                              Liens incurred or deposits made in
the ordinary course of business in connection with (1) worker’s compensation,
social security, unemployment insurance and other like laws or (2) sales
contracts, leases, statutory obligations, work in progress advances and other
similar obligations not incurred in connection with the borrowing of money or
the payment of the deferred purchase price of property;

 

(vii)                           reservations, covenants, zoning and
other land use regulations, title exceptions or encumbrances granted in the
ordinary course of business, affecting real Property owned or leased by a
Credit Party or one of its Subsidiaries; provided that such exceptions
do not in the aggregate materially interfere with the use of such Property in
the ordinary course of any Credit Party’s or such Subsidiary’s business;

 

(viii)                        judgment Liens that do not give rise
to an Event of Default under subsection 10.1.12;

 

48

 

(ix)                                Liens securing Indebtedness
permitted by subsection 8.2.3(ix), but only so long as the
Intercreditor Agreement shall be in full force and effect and applicable to all
Indebtedness secured by such Liens;

 

(x)                                   deposits to secure surety and appeal
bonds, performance bonds and other obligations of like nature, in each case
incurred in the ordinary course of business;

 

(xi)                                Liens on proceeds payable under any
insurance policy (whether arising by statute or contract) to the extent
securing the payment of the unpaid portion of annual insurance premiums payable
by Credit Parties and their Subsidiaries in respect of such insurance policy, provided
that the aggregate amount so secured shall not at any time exceed $2,500,000;

 

(xii)                             Liens securing Product Obligations
incurred in the ordinary course of business and not for speculative purposes;

 

(xiii)                          Liens of a collection bank arising
under Section 4-208 of the Uniform Commercial Code on items in the course
of collection; and

 

(xiv)                         Liens in favor of New Holland Credit
Company and its parent entities, Daewoo Heavy Industries America Corporation,
Stihl Incorporated and Mitsui Machinery Distribution, Inc. (the “Specified
Vendors”), to the extent and only to the extent such Liens encumber
property sold or leased to Credit Parties by such Specified Vendors which has
not been paid in full, and only to the extent that the principal amount of the
obligations secured by such Liens does not exceed $2,500,000 in the aggregate
at any one time outstanding.

 

8.2.6                        Payments and Amendments of Certain Debt.

 

(i)                                     make any payment of any part or all
of any Subordinated Debt or take any other action or omit to take any other
action in respect of any Subordinated Debt, except in accordance with the
subordination agreement relative thereto or the subordination provisions
thereof; or

 

(ii)                                  amend or modify any agreement,
instrument or document evidencing or relating to any Subordinated Debt; or

 

(iii)                               amend, modify, replace or refinance
any First Lien Debt Document if such amendment, modification, replacement or
refinancing would (A) modify (or have the effect of modifying) the provisions
therein in respect of the repayment, prepayment, amendment or refinancing of
(or any like concept with respect to) the Obligations or the documents
evidencing the Obligations or otherwise relating thereto), in each case, in a
manner that would be materially adverse to Lenders as compared to those in
effect on the Closing Date or (B) increase the applicable margin used in
determining the interest rate for the Indebtedness under the First Lien Debt
Documents (or, if the amended First Lien Debt Documents provide for a fixed
interest rate, increase the effective interest rate) from the applicable margin
used in determining

 

49

 

the interest
rate thereunder that would apply on the Closing Date if “Level I” on the
pricing grid in the definition of “Applicable Margin” in the First Lien Loan
and Security Agreement were to apply (or, if the amended First Lien Debt
Documents provide for a fixed interest rate, the interest rate that would be
applicable to the First Lien Debt on the date of such amendment or modification
if such rate were determined by adding the applicable margin that would apply
on the Closing Date if “Level I” on the pricing grid in the definition of “Applicable
Margin” in the First Lien Loan and Security Agreement were to apply to 9 month
LIBOR as of the day of such amendment or modification) by an amount in excess
of the sum of (1) 2.0% plus (2) the amount, if any, by which the interest rate
applicable to any portion of the Term Loans has been increased over (A) 8.0%
with respect to LIBOR Portions and (B) 7.0% with respect to Base Rate Portions;
provided that this subsection 8.2.6(iii) shall not prohibit
any First Lien Debt Document from providing that the Indebtedness thereunder
shall bear interest at a default rate of up to 2% in excess of the then stated
rate at any time an event of default has occurred and is continuing thereunder.

 

8.2.7                        Distributions. 
Declare or make any Distributions, except for:

 

(i)                                     Distributions by any Subsidiary of a
Credit Party to a Credit Party;

 

(ii)                                  Distributions paid solely in Securities
(other than Disqualified Capital Stock) of a Credit Party or any of its
Subsidiaries (and solely as permitted under Section 8.2.9); and

 

(iii)                               Distributions by a Credit Party in
amounts necessary to permit such Credit Party to repurchase Securities of a
Credit Party from employees of any Credit Party or any of its Subsidiaries upon
the termination of their employment, so long as no Default or Event of Default
exists at the time of or would be caused by the making of such Distributions
and the aggregate cash amount of all such Distributions, measured at the time
when made, does not exceed $500,000 in any fiscal year of Credit Parties.

 

8.2.8                        Disposition of Assets.  Sell, lease,
license or otherwise dispose of any of its Properties, including any disposition
of Property as part of a sale and leaseback transaction, to or in favor of any
Person, except for:

 

(i)                                     leases of Serialized Rental
Equipment Inventory and other Inventory in the ordinary course of business;

 

(ii)                                  sales or other dispositions of
Serialized Rental Equipment Inventory in the ordinary course of business
(including by way of exchange of such Serialized Rental Equipment Inventory for
other Serialized Rental Equipment Inventory of an equal or greater fair market
value pursuant to original equipment manufacturers’ trade packages in the
ordinary course of business), provided that if the Net Cash Proceeds of any
single disposition or series of related dispositions of such Property exceed
$5,000,000 and such Net Cash Proceeds are not reinvested within 180 days after
receipt of such Net Cash Proceeds, such proceeds shall, if and to the extent
required by

 

50

 

subsection 3.3.1, be remitted to Administrative
Agent for application to the Term Loans and other Obligations as provided in subsection 3.3.1;

 

(iii)                               sales of Inventory (other than
Serialized Rental Equipment Inventory) in the ordinary course of business;

 

(iv)                              sales of Property (other than
Accounts or Inventory) with a fair market value or a net book value (whichever
is greater) not exceeding $6,000,000 in the aggregate during any consecutive
twelve-month period;

 

(v)                                 transfers of Property to a Credit
Party by another Credit Party or to a Credit Party by a Subsidiary of a Credit
Party;

 

(vi)                              dispositions of Property that is
worn, damaged, uneconomic or obsolete or no longer used or useful, provided
that either (A) (1) such Property is replaced with Property which is used or
useful in the business of a Credit Party or one of its Subsidiaries (other than
a Foreign Subsidiary), (2) the replacement Property is acquired or committed to
be purchased within 180 days prior to or following the disposition of the
Property that is to be replaced and (3) the replacement Property shall be free
and clear of Liens other than Liens securing Permitted Purchase Money
Indebtedness or (B) the Net Cash Proceeds of such disposition, if and to the
extent required by subsection 3.3.1, are remitted to Administrative
Agent for application to the Term Loans as provided in subsection 3.3.1;

 

(vii)                           dispositions in the ordinary course
of business of investments described in paragraphs (iv), (v), (vi) and (vii) of
the definition of the term “Restricted
Investments”; and voluntary terminations of Derivative Obligations
in the ordinary course of business;

 

(viii)                        the sale of all or part of the
assets or business constituting the Studio Business Unit and the Hoist Business
Unit of Credit Parties in one or more transactions, provided that (A)
each such transaction is for a sales price of not less than $10,000,000, (B)
the consideration received consists solely of (x) cash or (y) a combination of
cash and promissory notes issued by the purchaser of such business (provided
that in the case of consideration consisting of promissory notes, (1) such
consideration shall not exceed 35% of the aggregate sales price in the case of
the Hoist business and 35% of the aggregate sales price in the case of the
Studio business, (2) such promissory notes shall be pledged to Administrative
Agent, for the benefit of the Lenders, pursuant to a pledge agreement in form
and substance reasonably satisfactory to Administrative Agent, (3) all payments
of principal, interest and other amounts payable under such promissory notes
and that are received by Credit Parties or their Subsidiaries shall be remitted
to Administrative Agent for application in accordance with subsection 3.3.1
and (4) the aggregate principal amount of all promissory notes received as
consideration for all asset sales permitted under this subsection 8.2.8(viii)
shall not exceed $7,500,000 at any one time outstanding) and (C) if Borrower
shall have given Administrative Agent written notice prior to the consummation
of such sale of Borrower’s intention to use the Net Cash Proceeds thereof to
reinvest in the business of

 

 

51

 

Borrower and
its Subsidiaries (other than Foreign Subsidiaries) through the purchase of
assets used or useful in the business of Borrower and its Subsidiaries (other
than Foreign Subsidiaries), then the Net Cash Proceeds of such sale shall not
be required to prepay the Term Loans; provided, further, that if
(a) any Default or Event of Default shall have occurred and be continuing on
the date such Net Cash Proceeds are received by Borrower or such applicable
Subsidiary or at the time of such reinvestment or (b) Borrower or such
applicable Subsidiary shall have failed to complete such reinvestment within
180 days after consummation of the sale of the applicable business unit, then
such portion of the Net Cash Proceeds as has not been reinvested at such time
shall, if and to the extent required by subsection 3.3.1, be
remitted to Administrative Agent for application in accordance with subsection 3.3.1;
and

 

(ix)                                the sale of assets comprising a
division or business unit in one or more transactions, provided that (A)
the consideration received in connection with all such sale or sales (x) shall
consist solely of cash and (y) shall not exceed $100,000,000 in the aggregate,
(B) the consideration received in connection with each such sale shall, at the
time of execution of definitive documentation with respect to such sale,
represent no less than the greater of (1) the Total Funded Senior Leverage
Ratio as of the last day of the most recently ended fiscal quarter of Borrower
and (2) four (4) times the amount of Adjusted Consolidated EBITDA for the
twelve consecutive month period ending as of the last day of the most recently
ended fiscal quarter of Borrower that is attributable to the corresponding
assets sold, (C) the consideration received in connection with each such sale
shall be in an amount at least equal to the orderly liquidation value of the
assets sold as set forth in the most recent appraisal relating thereto
delivered to Administrative Agent in accordance with the terms of the Agreement
and (D) if Borrower shall have given Administrative Agent written notice prior
to the consummation of such sale of Borrower’s intention to use the Net Cash
Proceeds thereof to reinvest in the business of Borrower and its Subsidiaries
(other than Foreign Subsidiaries) through the purchase of assets used or useful
in the business of Borrower and its Subsidiaries (other than Foreign
Subsidiaries), then the Net Cash Proceeds of such sale shall not be required to
prepay the Term Loans; provided, further, that if (a) any Default
or Event of Default shall have occurred and be continuing on the date such Net
Cash Proceeds are received by Borrower or such applicable Subsidiary or at the
time of such reinvestment or (b) Borrower or such applicable Subsidiary shall
have failed to complete such reinvestment within 180 days after consummation of
the sale of the applicable division or business unit, then such portion of the
Net Cash Proceeds as has not been reinvested at such time shall, if and to the
extent required by subsection 3.3.1, be remitted to Administrative
Agent for application in accordance with subsection 3.3.1

 

provided, that sales or other dispositions
pursuant to the foregoing clauses (iv), (vi), (viii) and (ix) shall only be
permitted so long as no Default or Event of Default exists at the time of such
sale or disposition; and provided, further, that if
Administrative Agent shall have delivered a Dominion Notice in accordance with subsection 6.2.4,
the Net Cash Proceeds of any sale or disposition pursuant to this subsection 8.2.8
shall be, if and to the extent required by subsection 3.3.1,
remitted to Administrative Agent for application to the Term Loans and other
Obligations as provided in subsection 3.3.1.

 

52

 

8.2.9                        Issuance of Securities.  Issue any
additional Securities, except for issuances (i) of Securities of a Credit Party
(other than Borrower) to another Credit Party, (ii) of Securities of Borrower
to management and employees of any Credit Party, (iii) of Securities of
Borrower to Persons that are holders of Securities of Borrower
on the Closing Date, (iv) of Securities of Borrower, the Net Cash Proceeds of
which are used to purchase Collateral or (v) of Securities of Borrower, the Net
Cash Proceeds of which are used to repay the Term Loans as and to the extent
provided in subsection 3.3.2; provided, however, that
no Credit Party or any of its Subsidiaries may issue Securities consisting of
Disqualified Capital Stock; and provided, further, that no
issuance shall be permitted pursuant to this subsection if such issuance
would result in a Change of Control.

 

8.2.10                  Bill-and-Hold Sales, Etc. 
Make a sale to any customer on a bill-and-hold, guaranteed sale, sale
and return, sale on approval, repurchase or return or consignment basis, provided
that Credit Parties may provide rental purchase options to their customers in
the ordinary course of business and consistent with past practices, pursuant to
which customers may purchase the Rental Equipment Inventory rented by such
customers at the expiration of the applicable rental term for a purchase price
not less than the fair market value of such Rental Equipment Inventory.

 

8.2.11                  Restricted
Investment. 
Make or have any Restricted Investment.

 

8.2.12                  Subsidiaries
and Joint
Ventures.  Create, acquire or otherwise suffer to exist
any Subsidiary (other than any Subsidiary organized under the laws of Canada)
or joint venture arrangement, in each case, not in existence as of the date
hereof, except that Credit Parties and their Subsidiaries may enter into any
joint venture arrangement after the Closing Date so long as (A) such
arrangement will not involve, require or result in or otherwise obligate any
cash or cash consideration made or to be made by any Credit Party or any of its
Subsidiaries in an aggregate amount in excess of $5,000,000 and no Default or
Event of Default shall have occurred and be continuing immediately before or
after entering into such arrangement or (B) if such arrangement will involve,
require or result in or otherwise obligate any cash or cash consideration made
or to be made by any Credit Party or any of its Subsidiaries in an aggregate
amount in excess of $5,000,000, (x) immediately before and after entering into
such arrangement, no Default or Event of Default shall have occurred and be
continuing and (y) Borrower shall submit a certificate of the chief financial
officer of Borrower, in such officer’s capacity as such, certifying that the
conditions set forth in this clause (B) have been satisfied; and provided,
further, that in no event shall any joint venture arrangements entered into
pursuant to this subsection 8.2.12 involve, require or result in or
otherwise obligate any cash or cash consideration made or to be made by any
Credit Parties or any of its Subsidiaries in an aggregate amount in excess of
$15,000,000.

 

8.2.13                  Tax
Consolidation. 
File or consent to the filing of any consolidated income tax return with
any Person other than Borrower, another Credit Party and Credit Parties’
Subsidiaries.

 

8.2.14                  Organizational
Documents. 
Agree to, or suffer to occur, any amendment, supplement or addition to
its or any of its Subsidiaries’ charter, articles or

 

 

53

 

certificate of
incorporation, certificate of formation, limited partnership agreement, bylaws,
limited liability agreement, operating agreement or other organizational
documents (as the case may be), that, in each case, would reasonably be expected
to have a Material Adverse Effect.

 

8.2.15                  Fiscal
Year End. 
Change its fiscal year end.

 

8.2.16                  Negative
Pledges. 
Enter into or suffer to exist any agreement limiting the ability of any
Credit Party or any of its Subsidiaries (i) to voluntarily create Liens
upon any of its Property, (ii) to pay dividends or to make any other
distribution on any Securities of any Credit Party or any of its Subsidiaries,
(iii) to pay or prepay or to subordinate any Indebtedness owed to any Credit
Party or any of its Subsidiaries, (iv) to make loans or advances to any Credit
Party or any of its Subsidiaries or (v) to transfer any of its property or
assets to any Credit Party or any of its Subsidiaries, or permit any of its
Subsidiaries to do any of the foregoing, except for the First Lien Debt
Documents as in effect on the Closing Date and any replacements or refinancings
thereof (as long as such replacement or refinancing documents contain
provisions with respect to the forgoing that are not more restrictive than those
contained in the First Lien Debt Documents as in effect on the Closing Date).

 

8.2.17                  Leases.  Become a
lessee under any operating lease (other than a lease under which a Credit Party
or any of its Subsidiaries is lessor) of Property if the aggregate Rentals
payable during any current or future period of twelve (12) consecutive months
under the lease in question and all other leases under which Credit Parties or
any of their Subsidiaries are then lessees would exceed $40,000,000.  The term “Rentals” means, as of the date of
determination, all payments which the lessee is required to make by the terms
of any lease.

 

8.2.18                  Anti-Terrorism Laws. (i)  Conduct any business or engage in any
transaction or dealing with any Blocked Person, including the making or receiving
of any contribution of funds, goods or services to or for the benefit of any
Blocked Person; (ii) deal in, or otherwise engage in any transaction relating
to, any property or interests in property blocked pursuant to Executive Order
No. 13224; or (iii) engage in or conspire to engage in, nor permit any of their
Subsidiaries to engage in or conspire to engage in,  any transaction that evades or avoids, or has
the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in Executive Order No. 13224 or the USA Patriot
Act.  Each of the Credit Parties shall
deliver to Administrative Agent and Lenders any certification or other evidence
requested from time to time by Administrative Agent or any Lender, in
Administrative Agent’s sole discretion, confirming such Person’s compliance
with this subsection 8.2.18.

 

8.2.19                  Change
in Nature
of Business.  Engage in any material line of business
substantially different from those lines of business generally conducted by the
Credit Parties on the date hereof or any business substantially related or
incidental thereto or reasonable extensions thereof.

 

54

 

8.2.20                  Location of Personal Property. 
Have at any time personal property at any single location having a value
in excess of the applicable amount payable per occurrence by the Credit Parties’
insurance with respect to any loss of such property.

 

8.3              Specific Financial Covenants.During the Term, and thereafter for
so long as there are any Obligations outstanding, Borrower covenants that it
shall comply with all of the financial covenants set forth in Exhibit 8.3
hereto.  If GAAP changes from the basis
used in preparing the audited financial statements delivered to Administrative
Agent by Borrower on or before the Closing Date, Borrower will provide
Administrative Agent with certificates demonstrating compliance with such
financial covenants and will include, at the election of Borrower or upon the
request of Administrative Agent, calculations setting forth the adjustments
necessary to demonstrate how Borrower is also in compliance with such financial
covenants based upon GAAP as in effect on the Closing Date.

 

SECTION 9.  CONDITIONS PRECEDENT

 

9.1              Conditions to Term Loans. 
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of
Administrative Agent or any Lender under the other sections of this Agreement,
no Lender shall be required to make the Term Loans unless and until each of the
following conditions has been satisfied on or prior to the Closing Date:

 

9.1.1                        Documentation. 
Administrative Agent shall have received, in form and substance
satisfactory to Administrative Agent, Syndication Agent and their respective
counsel, a duly executed copy of this Agreement and the other Loan Documents,
together with such additional documents, instruments, opinions and certificates
as Administrative Agent, Syndication Agent and their respective counsel shall
require, all in form and substance satisfactory to Administrative Agent,
Syndication Agent and their
respective counsel.

 

9.1.2                        Real Property. 
Administrative Agent shall have received ALTA title policies, in form
and substance reasonably acceptable to Administrative Agent, with respect to
the Mortgages for the properties set forth on Exhibit 7.17.

 

9.1.3                        Security Interest Matters. 
Administrative Agent shall have received:

 

(i)                                     certified copies of lien search
reports for the jurisdictions reasonably requested by Administrative Agent
(including UCC, tax and judgment liens and intellectual property filings)
listing all effective financing statements or other filings which name as
debtor any Credit Party or any of its Subsidiaries, together with copies of
such financing statements (or similar filings in any foreign jurisdiction),
none of which, except as otherwise agreed in writing by Administrative Agent,
shall cover any of the Collateral or show any Liens other than Permitted Liens;
and

 

55

 

(ii)                                  duly executed UCC-3 Termination
Statements, mortgage releases and such other instruments, in form and substance
satisfactory to Administrative Agent, as shall be necessary to terminate and
satisfy all Liens on the Property of the Credit Parties except Permitted Liens.

 

9.1.4                        Insurance. 
Administrative Agent shall have received evidence, in form, scope, and
substance, satisfactory to Administrative Agent, of all insurance coverage as
required by this Agreement (including, without limitation a loss payable
endorsement naming Administrative Agent and Lenders as loss payees and as
additional insureds).

 

9.1.5                        Solvency. 
Administrative Agent and Syndication Agent shall have determined to
their satisfaction that (1) Adjusted Consolidated EBITDA (as defined in
Exhibit 8.3) for Borrower and its Subsidiaries for Borrower’s fiscal year ended December 31, 2003
shall be equal to or greater than $125,000,000, (2) each Credit Party is
adequately capitalized, (3) the fair saleable value of each Credit Party’s
assets exceeds its liabilities on the Closing Date and (4) each Credit
Party will have sufficient working capital to pay its debts as they become due.

 

9.1.6                        Payoff of Prior Indebtedness. 
Administrative Agent shall have received satisfactory evidence that,
after giving effect to the making of the Term Loans and the receipt of the
proceeds of the First Lien Debt to be funded on the Closing Date, the Prior
Indebtedness shall be fully and finally paid.

 

9.1.7                        Consents. 
Administrative Agent shall have received evidence that all governmental,
shareholder and third party consents and approvals necessary in connection with
the transactions and related financings contemplated hereby and by the Loan
Documents were obtained by Credit Parties and all applicable waiting periods
have expired without any action being taken by any authority that could
restrain, prevent or impose any material adverse conditions on such
transactions or that could seek or threaten any of the foregoing, and no law or
regulation shall be applicable which in the judgment of Administrative Agent
could have such effect.

 

9.1.8                        Financial Statements. 
Administrative Agent shall have received, each in form and substance
satisfactory to Administrative Agent and Syndication Agent, (a) a pro forma
balance sheet of Borrower dated as at the Closing Date which balance sheet
shall reflect no material adverse changes from the most recent pro forma
balance sheet of Borrower previously delivered to Administrative Agent and
(b) interim monthly financial statements for Borrower as at June 30,
2004.

 

9.1.9                        Payment of Fees. 
Administrative Agent shall have received, for its account or the account
of Syndication Agent, the Joint Lead Arrangers or Lenders, as applicable,
payment in full of the fees required to be paid to Administrative Agent,
Syndication Agent or Lenders under or in connection with this Agreement on the
Closing Date, and Administrative Agent shall have received evidence
satisfactory to Administrative Agent that the reasonable fees and expenses of
Administrative Agent’s, Syndication Agent’s (subject to the limitations set
forth herein) and Lenders’ counsel,

 

56

 

financial advisors,
appraisers, commercial finance examiners and other advisers incurred or accrued
through the Closing Date have been paid.

 

9.1.10                  Issuance of First Lien Debt. 
(i) Borrower shall have incurred the term loan portion of the First
Lien Debt on terms and conditions satisfactory to Administrative Agent and
Syndication Agent and (ii) Administrative Agent shall have received
(A) evidence satisfactory to it that Borrower has received gross proceeds
of at least $200,000,000 from the incurrence of the term portion of the First
Lien Debt (and shall have received revolving credit commitments with respect to
an additional $100,000,000 of the First Lien Debt), (B) copies of all of
the First Lien Debt Documents as in effect on the Closing Date, certified as
true and correct copies thereof by a Responsible Officer of Borrower, in such
officer’s capacity as such, together with a certificate of a Responsible
Officer of Borrower stating that such agreements remain in full force and
effect, have not been otherwise amended or modified, and that, to the knowledge
of such Responsible Officer, none of the Credit Parties is in breach or default
in any of its obligations under such agreements, other than breaches or
defaults that, individually and in the aggregate, are of immaterial obligations
thereunder, and (C) a duly executed copy of the Intercreditor Agreement.

 

9.1.11                  [Intentionally Omitted].

 

9.1.12                  Material Adverse Change. 
As of the Closing Date, since March 31, 2004, there shall not have
been any material adverse change, in the reasonable opinion of Administrative
Agent and Syndication Agent, in the business, assets, liabilities (actual or
contingent), results of operations or financial condition of Borrower and its
Subsidiaries taken as a whole and no event or condition exists which would be
reasonably likely to result in any Material Adverse Effect.

 

9.1.13                  Appraisals. 
Administrative Agent and Syndication Agent shall have received an
appraisal, satisfactory to Administrative Agent and Syndication Agent in form
and substance, of all of the Serialized Rental Equipment Inventory of Credit
Parties as of May 31, 2004 and performed by Rouse Asset Services which shall
state the orderly liquidation value (expressed as a percentage of net book
value) of all such Serialized Rental Equipment Inventory.

 

9.1.14                  USA Patriot Act Certificate. 
Administrative Agent shall have received, at least five (5) Business
Days prior to the Closing Date, a certificate of a Responsible Officer of
Borrower, in such officer’s capacity as such, reasonably satisfactory thereto,
for the benefit of Administrative Agent and the Lenders, that sets forth
information required by the USA Patriot Act including, without limitation, the
identity of Credit Parties, the names and addresses of the Credit Parties and
other information that will allow Administrative Agent or any Lender, as applicable,
to identify the Credit Parties in accordance with the USA Patriot Act.

 

9.1.15                  Representations and Warranties; No
Default.  At the time of and after giving effect to the
making of the Term Loans and the application of the proceeds thereof, (i) the
representations and warranties contained in Section 7 and in each
other

 

57

 

Loan Document
delivered to Administrative Agent or any Lender pursuant hereto or thereto
shall be true and correct in all material respects on and as of such date as
though made on and as of such date and (ii) no Default or Event of Default
shall have occurred and be continuing.

 

9.1.16                  First Lien Debt Documents. 
The making of such Term Loan shall not contravene, violate or result in
a default under the First Lien Debt Documents.

 

Without limiting the
generality of the provisions of this Section 9, for purposes of
determining compliance with the conditions specified in this Section 9,
each Lender that has signed this Agreement shall be deemed to have consented
to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to the Administrative Agent, the Syndication Agent or a Lender
unless Administrative Agent shall have received notice from such Lender prior
to the proposed Closing Date specifying its objection thereto.

 

SECTION 10.  EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT

 

10.1        Events of Default.  The
occurrence of one or more of the following events shall constitute an “Event of Default”:

 

10.1.1                  Payment of Obligations. 
Credit Parties or any of their Subsidiaries shall fail to pay (a) any
principal of any Term Loan hereunder or under any Term Note on the due date
thereof (whether due at stated maturity, on demand, upon acceleration or
otherwise) or (b) any of the Obligations (other than the amount referred to in
clause (a)) hereunder or under any Term Note or under any other Loan Document
on the due date thereof (whether due at stated maturity, on demand, upon
acceleration or otherwise) and, in the case of clause (b) only, such default
shall continue unremedied for a period of three (3) Business Days.

 

10.1.2                  Misrepresentations. 
Any representation, warranty or other statement made or furnished to
Administrative Agent or any Lender by or on behalf of any Credit Party or any
Subsidiary of any Credit Party in this Agreement or any of the other Loan
Documents proves to have been false or misleading in any material respect when
made or furnished.

 

10.1.3                  Breach of Specific Covenants. 
Any Credit Party shall fail or neglect to perform, keep or observe any
covenant contained in Section or subsection 5.2, 5.3,
5.4, 6.1.1, 6.1.2, 6.2.4, 6.2.5, 8.1.1,
8.1.2, 8.1.4, 8.2 or 8.3 hereof on the date that
Credit Parties are required to perform, keep or observe such covenant or shall
fail or neglect to perform, keep or observe any covenant contained in subsection 8.1.3
or 8.1.6 hereof within 10 days following the date on which Credit
Parties are required to perform, keep or observe such covenant.

 

10.1.4                  Breach of Other Covenants. 
Any Credit Party or any of its Subsidiaries shall fail or neglect to
perform, keep or observe any covenant contained in this Agreement (other than a
covenant which is dealt with specifically elsewhere in

 

 

58

 

subsection 10.1 hereof) or any of the other Loan
Documents and the breach of such other covenant is not cured within 15 days.

 

10.1.5                  Other Defaults. 
There shall occur any default or event of default on the part of any
Credit Party or any Subsidiary of any Credit Party under any agreement,
document or instrument to which such Credit Party or such Subsidiary of such
Credit Party is a party or by which such Credit Party or such Subsidiary of
such Credit Party or any of its Property is bound, evidencing or relating to
(a) any Indebtedness (other than the Obligations or the First Lien Debt) with
an outstanding principal balance in excess of $5,000,000, if the payment or
maturity of such Indebtedness is or could be accelerated in consequence of such
event of default or demand for payment of such Indebtedness is made or could be
made in accordance with the terms thereof or (b) the First Lien Debt; provided
that with respect to any default or event of default under the First Lien Debt
Documents, such default or event of default shall constitute an Event of
Default under this Agreement if either (i) such default or event of default is
a payment default or (ii) such default or event of default is other than as
described in clause (i) and such default or event of default occurs and is not
cured or waived within thirty (30) days after the occurrence of such default or
event of default.

 

10.1.6                  Insolvency and Related Proceedings.

 

(i)                                     Any Credit Party or any Subsidiary
of any Credit Party shall (A) be unable generally to pay its debts as they
become due; (B) make any offer of settlement, extension or composition to their
respective unsecured creditors generally; (C) file a voluntary petition in
bankruptcy or file a voluntary petition or an answer or otherwise commence any
action or proceeding seeking reorganization, arrangement or readjustment of its
debts or for any other relief under the U.S. federal bankruptcy laws, or under any
other bankruptcy or insolvency act or law, state or federal, now or hereafter
existing, or consent to, approve of, or acquiesce in, any such petition, action
or proceeding; (D) apply for or acquiesce in the appointment of a receiver,
assignee, liquidator, sequestrator, custodian, monitor, trustee or similar
officer for it or for all or any part of its property; or (E) make an
assignment for the benefit of creditors;

 

(ii)                                  an involuntary petition shall be
filed or an action or proceeding otherwise commenced seeking reorganization,
arrangement, consolidation or readjustment of the debts of any Credit Party or
any Subsidiary of any Credit Party or for any other relief under the U.S.
bankruptcy laws or under any other bankruptcy or insolvency act or law, state
or federal, now or hereafter existing and such petition or proceeding shall not
be dismissed within thirty (30) days after the filing or commencement thereof
or an order of relief shall be entered with respect thereto;

 

(iii)                               a receiver, assignee, liquidator,
sequestrator, custodian, monitor, trustee or similar officer for any Credit
Party or any Subsidiary of any Credit Party or for all or any part of its
property shall be appointed or a warrant of attachment, execution or similar
process shall be issued against any part of the property of any Credit Party or
any Subsidiary of any Credit Party;

 

59

 

(iv)          any Credit Party or any Subsidiary of any Credit Party
(other than any Inactive Subsidiary) shall file a certificate of dissolution
under applicable state law or shall be liquidated, dissolved or wound-up or
shall commence or have commenced against it any action or proceeding for
dissolution, winding-up or liquidation;

 

(v)           any Credit Party or any Subsidiary of any Credit Party
shall take any corporate action in furtherance of any of the matters described
in the foregoing clauses (i) through (iv).

 

10.1.7      Business Disruption; Condemnation. 
(i) There shall occur a cessation of a substantial part of the business
of any Credit Party or any Subsidiary of any Credit Party for a period which
materially adversely affects Credit Parties’ and their Subsidiaries’ capacity,
taken as a whole, to continue their business on a profitable basis; or (ii) any
Credit Party or any Subsidiary of any Credit Party shall suffer the loss or
revocation of any material license or permit now held or hereafter acquired by
any Credit Party or any Subsidiary of any Credit Party which is necessary to
the continued or lawful operation of its business if such loss or revocation
could reasonably be expected to have a Material Adverse Effect; or (iii) any
Credit Party or any Subsidiary of any Credit Party shall be enjoined,
restrained or in any way prevented by court, governmental or administrative
order from conducting all or any material part of its business affairs which
injunction, restraint or prevention materially adversely affects Credit Parties’
and their Subsidiaries’ capacity, taken as a whole, to continue their business
on a profitable basis; or (iv) any material lease or agreement pursuant to
which any Credit Party or any Subsidiary of any Credit Party, uses or occupies
any Property shall be canceled or terminated prior to the expiration of its
stated term, except any such lease or agreement the cancellation or termination
of which could not reasonably be expected to have a Material Adverse Effect; or
(v) any material portion of the Collateral shall be taken through condemnation
or the value of such material portion of the Collateral shall be impaired
through condemnation.

 

10.1.8      Change of Control.  A Change of
Control shall occur.

 

10.1.9      ERISA Event. An ERISA Event shall occur with respect to a Pension
Plan or Multiemployer Plan which has resulted or could reasonably be expected
to result in liability of any Credit Party or any ERISA Affiliate under
Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an
aggregate amount in excess of $1,000,000; (ii) the aggregate amount of
Unfunded Pension Liability among all Pension Plans at any time exceeds
$1,000,000; (iii) any Credit Party or any ERISA Affiliate shall fail to
pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan; or (iv) a Lien is reasonably expected
to arise in accordance with the provisions of ERISA against the assets of any
Credit Party, any Subsidiary thereof or any ERISA Affiliate.

 

10.1.10    Challenge to Agreement. 
Any Credit Party or any Subsidiary of any Credit Party, or any Affiliate
of any of them, shall challenge or contest in any action, suit or proceeding
the validity or enforceability of this Agreement or any of the other 

 

60

 

Loan Documents, the legality or
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Administrative Agent.

 

10.1.11    Criminal Forfeiture. 
Any Credit Party or any Subsidiary of any Credit Party shall be
criminally indicted or convicted under any law that could reasonably be
expected to lead to a forfeiture of any material portion of the Collateral, and
in the case of any indictment, such indictment is not dismissed within one
hundred twenty (120) days.

 

10.1.12    Judgments.  Any money
judgment, writ of attachment or similar processes (collectively, “Judgments”) are issued or rendered against
any Credit Party or any Subsidiary of any Credit Party, or any of their
respective Property (i) in the case of money judgments, in an amount of
$3,000,000 or more for any single judgment, attachment or process or $9,000,000
or more for all such judgments, attachments or processes in the aggregate, in
each case in excess of any applicable insurance with respect to which the
insurer has admitted liability, and (ii) in the case of non-monetary
Judgments, such Judgment or Judgments (in the aggregate) could reasonably be
expected to have a Material Adverse Effect, in each case which Judgment is not
stayed, released or discharged within 60 days.

 

10.1.13    Material Adverse Effect. 
Any event occurs which reasonably could be expected to have a Material
Adverse Effect.

 

10.1.14    Intercreditor Arrangements. 
(i) Any of the Obligations of any Credit Party under the Loan
Documents for any reason shall cease to be permitted under the First Lien Debt
Documents or in any agreement evidencing any refinancing thereof as permitted
under the terms of the Loan Documents, other than as a result, directly or
indirectly, of any acts or omissions of Administrative Agents or Lenders or
(ii) the Intercreditor Agreement shall, in whole or in part, cease to be
effective or cease to be legally valid, binding and enforceable against the
holders of the First Lien Debt or any refinanced Indebtedness thereof as
permitted under the terms of the Loan Documents other than as a result,
directly or indirectly, of any acts or omissions of Administrative Agent or the
Discharge of the First Lien Obligations (as defined in the Intercreditor
Agreement).

 

10.1.15    Loan Documents; Liens. 
Any Loan Document shall at any time for any reason (other than pursuant
to the express terms thereof) cease to be valid and binding on or enforceable
against any Credit Party intended to be a party thereto; or any Security
Document shall for any reason fail or cease to create a valid and perfected
Lien (subject only to Permitted Liens) in favor of Administrative Agent for the
benefit of Administrative Agent and Lenders on any material portion of the
Collateral purported to be covered thereby.

 

10.2      Acceleration
of the Obligations. 
Upon or at any time after the occurrence and during the continuance of
an Event of Default, Administrative Agent or Majority Lenders may declare all
or any portion of the Obligations at once due and payable without presentment,
demand protest or further notice by Administrative Agent or any Lender,

 

61

 

 and
Credit Parties shall forthwith pay to Administrative Agent, the full amount of
such Obligations, provided, that upon the occurrence of an Event of
Default specified in subsection 10.1.6 hereof, all of the
Obligations shall become automatically due and payable, in each case without
declaration, notice or demand by Administrative Agent or any Lender.

 

10.3      Other Remedies.  Upon the occurrence and during the
continuance of an Event of Default, Administrative Agent shall have and may
exercise from time to time the following other rights and remedies, which
rights and remedies, when in respect of the Collateral, shall be subject to the
Intercreditor Agreement:

 

10.3.1      All of the rights and remedies of a secured party
under the UCC or under other applicable law, and all other legal and equitable
rights to which Administrative Agent or Lenders may be entitled, all of which
rights and remedies shall be cumulative and shall be in addition to any other
rights or remedies contained in this Agreement or any of the other Loan Documents,
and none of which shall be exclusive.

 

10.3.2      The right to take immediate possession of the
Collateral, and to (i) require each Credit Party and each of its
Subsidiaries to assemble the Collateral, at Credit Parties’ expense, and make
it available to Administrative Agent at a place designated by Administrative
Agent which is reasonably convenient to both parties, and (ii) enter any
premises where any of the Collateral shall be located and to keep and store the
Collateral on said premises until sold (and if said premises be the Property of
any Credit Party or any Subsidiary of any Credit Party, Credit Parties agree
not to charge, or permit any of its Subsidiaries to charge, Administrative
Agent for storage thereof).

 

10.3.3      The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with only such notice,
if any, as may be required by law, in lots or in bulk, for cash or on credit, all
as Administrative Agent, in its sole discretion, may deem advisable.  Administrative Agent may, at Administrative
Agent’s option, disclaim any and all warranties regarding the Collateral in
connection with any such sale.  Credit
Parties agree that, if any notice is required, 10 days’ written notice to
Credit Parties or any of their Subsidiaries of any public or private sale or
other disposition of Collateral shall be reasonable notice thereof, and such
sale shall be at such locations as Administrative Agent may designate in said
notice.  Administrative Agent shall have
the right to conduct such sales on any Credit Party’s or any of its
Subsidiaries’ premises, without charge therefor, and such sales may be
adjourned from time to time in accordance with applicable law.  Administrative Agent shall have the right to
sell, lease or otherwise dispose of the Collateral, or any part thereof, for
cash, credit or any combination thereof, and Administrative Agent, on behalf of
Lenders, may purchase all or any part of the Collateral at public or, if
permitted by law, private sale and, in lieu of actual payment of such purchase
price, may set off the amount of such price against the Obligations.  The proceeds realized from the sale of any
Collateral may be applied: first to the costs, expenses and attorneys’ fees
incurred by Administrative Agent in collecting the Obligations, in enforcing
the rights of Administrative Agent and Lenders under the Loan Documents and in
collecting, retaking, completing, protecting, removing, storing, 

 

62

 

advertising for sale, selling and delivering
any Collateral; second to the interest due upon any of the Obligations; and
third, to the principal of the Obligations. 
If any deficiency shall arise, each Credit Party shall remain jointly
and severally liable to Administrative Agent and Lenders therefor.

 

10.3.4      Administrative Agent is hereby granted a license or
other right to use, without charge, each Credit Party’s and each of its
Subsidiaries’ labels, patents, copyrights, licenses, rights of use of any name,
trade secrets, trade names, trademarks and advertising matter, or any Property
of a similar nature, as it pertains to the Collateral, in completing,
advertising for sale and selling any Collateral and each Credit Party’s and
each of its Subsidiaries’ rights under all licenses and all franchise
agreements shall inure to Administrative Agent’s benefit.

 

10.3.5      [Intentionally Omitted].

 

10.4      Setoff
and Sharing of Payments. 
In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, during the continuance of any
Event of Default, each Lender is hereby authorized by Credit Parties at any
time or from time to time and with reasonably prompt subsequent notice to
Credit Parties (any prior or contemporaneous notice to Credit Parties being
hereby expressly waived) to set off and to appropriate and to apply any and all
(i) balances held by such Lender at any of its offices for the account of
any Credit Party or any of its Subsidiaries (regardless of whether such
balances are then due to a Credit Party or its Subsidiaries) and
(ii) other property at any time held or owing by such Lender to or for the
credit or for the account of any Credit Party or any of its Subsidiaries,
against and on account of any of the Obligations.  Any Lender exercising a right to set off
shall purchase for cash (and the other Lenders shall sell) interests in each
such other Lender’s pro rata share of the Obligations as would be necessary to
cause such Lender to share such excess with each other Lender in accordance
with their respective Aggregate Percentages. 
Each Credit Party agrees,
to the fullest extent permitted by law, that any Lender may exercise its right
to set off with respect to amounts in excess of its pro rata share of the
Obligations and upon doing so shall deliver such excess to Administrative Agent
for the benefit of all Lenders in accordance with the Aggregate Percentages.

 

10.5      Remedies
Cumulative; No Waiver. 
All covenants, conditions, provisions, warranties, guaranties,
indemnities, and other undertakings of Credit Parties contained in this
Agreement and the other Loan Documents, or in any document referred to herein or
contained in any agreement supplementary hereto or in any schedule given to
Administrative Agent or any Lender or contained in any other agreement between
any Lender and Credit Parties or between Administrative Agent and Credit
Parties heretofore, concurrently, or hereafter entered into, shall be deemed
cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions, or agreements of Credit Parties herein contained.  The failure or delay of Administrative Agent
or any Lender to require strict performance by Credit Parties of any provision
of this Agreement or to exercise or enforce any rights, Liens, powers, or
remedies hereunder or under any of the aforesaid agreements or other documents
or security or Collateral shall not operate as a waiver of such performance,
Liens, rights, powers and remedies, but all such 

 

63

 

requirements, Liens, rights, powers, and
remedies shall continue in full force and effect until all Term Loans and other
Obligations owing or to become owing from Credit Parties to Administrative
Agent and each Lender have been fully satisfied.  None of the undertakings, agreements,
warranties, covenants and representations of any Credit Party contained in this
Agreement or any of the other Loan Documents and no Default or Event of Default
by any Credit Party under this Agreement or any other Loan Documents shall be
deemed to have been suspended or waived by Lenders, unless such suspension or
waiver is by an instrument in writing specifying such suspension or waiver and
is signed by a duly authorized representative of Administrative Agent and
directed to such Credit Party.

 

SECTION 11.  ADMINISTRATIVE
AGENT

 

11.1      Authorization
and Action.  Each
Lender hereby appoints and authorizes Administrative Agent to take such action
on its behalf and to exercise such powers under this Agreement and the other
Loan Documents as are delegated to Administrative Agent by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto.  Each Lender hereby acknowledges that
Administrative Agent shall not have by reason of this Agreement assumed a
fiduciary relationship in respect of any Lender.  In performing its functions and duties under
this Agreement, Administrative Agent shall act solely as agent of Lenders and
shall not assume, or be deemed to have assumed, any obligation toward, or
relationship of agency or trust with or for, any Credit Party.  As to any matters not expressly provided for
by this Agreement and the other Loan Documents (including without limitation
enforcement and collection of the Term Notes), Administrative Agent may, but
shall not be required to, exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of the Majority
Lenders, whenever such instruction shall be requested by Administrative Agent
or required hereunder, or a greater or lesser number of Lenders if so required
hereunder, and such instructions shall be binding upon all Lenders; provided,
that Administrative Agent shall be fully justified in failing or refusing to
take any action which exposes Administrative Agent to any liability or which is
contrary to this Agreement, the other Loan Documents or applicable law, unless
Administrative Agent is indemnified to its satisfaction by the other Lenders
against any and all liability and expense which it may incur by reason of
taking or continuing to take any such action. 
If Administrative Agent seeks the consent or approval of the Majority
Lenders (or a greater or lesser number of Lenders as required in this
Agreement), with respect to any action hereunder, Administrative Agent shall
send notice thereof to each Lender and shall notify each Lender at any time
that the Majority Lenders (or such greater or lesser number of Lenders) have
instructed Administrative Agent to act or refrain from acting pursuant hereto.

 

11.2      Administrative
Agent’s and Syndication Agent’s Reliance, Etc.  Neither Administrative Agent, Syndication
Agent, any Affiliate of Administrative Agent or Syndication Agent, nor any of
their respective directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the other Loan Documents, except (x) for its or their 

 

64

 

own gross negligence or willful misconduct,
as determined by a final non-appealable (or the time for appeal for which has
run) judgment of a court of competent jurisdiction or (y) to the extent
resulting from a claim brought by Borrower against it for breach in bad faith
of its obligations hereunder, if Borrower has obtained a final non-appealable
(or the time to appeal for which has run) judgment in its favor on such claim
as determined by a court of competent jurisdiction.  Without limitation of the generality of the
foregoing, each of Administrative Agent and Syndication Agent:  (i) may treat each Lender party hereto
as the holder of Obligations until Administrative Agent receives written notice
of the assignment or transfer or such lender’s portion of the Obligations
signed by such Lender and in form reasonably satisfactory to Administrative
Agent; (ii) may consult with legal counsel, independent public accountants
and other experts selected by it and shall not be liable for any action taken
or omitted to be taken in good faith by it in accordance with the advice of
such counsel, accountants or experts; (iii) makes no warranties or
representations to any Lender and shall not be responsible to any Lender for
any recitals, statements, warranties or representations made in or in
connection with this Agreement or any other Loan Documents; (iv) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement or the other Loan
Documents on the part of Credit Parties, to inspect the property (including the
books and records) of Credit Parties, to monitor the financial condition of
Credit Parties or to ascertain the existence or possible existence or
continuation of any Default or Event of Default;  (v) shall not be
responsible to any Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto;
 (vi) shall not be liable to any Lender for any action taken, or
inaction, by Administrative Agent upon the instructions of Majority Lenders
pursuant to subsection 11.1 hereof or refraining to take any action
pending such instructions; (vii) shall not be liable for any apportionment
or distributions of payments made by it in good faith pursuant to Section 3
hereof; (viii) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate, message or other instrument or writing (which may be by telephone,
facsimile, telegram, cable or telex) believed in good faith by it to be genuine
and signed or sent by the proper party or parties; and (ix) may assume
that no Event of Default has occurred and is continuing, unless Administrative
Agent has actual knowledge of the Event of Default, has received notice from
Borrower or Borrower’s independent certified public accountants stating the
nature of the Event of Default, or has received notice from a Lender stating
the nature of the Event of Default and that such Lender considers the Event of
Default to have occurred and to be continuing. 
In the event any apportionment or distribution described in clause (vii)
above is determined to have been made in error, the sole recourse of any Person
to whom payment was due but not made shall be to recover from the recipients of
such payments any payment in excess of the amount to which they are determined
to have been entitled.

 

11.3      BofA and Affiliates.  With respect to its commitment hereunder to
make Term Loans, BofA shall have the same rights and powers under this
Agreement and the other Loan Documents as any other Lender and may exercise the
same as though it were not Administrative Agent; and the terms “Lender,”
“Lenders” or “Majority Lenders” shall, unless otherwise
expressly indicated, include BofA in its individual capacity as a 

 

65

 

Lender. 
BofA and its Affiliates may lend money to, and generally engage in any
kind of business with, any Credit Party, and any Person who may do business
with or own Securities of any Credit Party, all as if BofA were not
Administrative Agent and without any duty to account therefor to any other
Lender.

 

11.4      Lender
Credit Decision. 
Each Lender acknowledges that it has, independently and without reliance
upon Administrative Agent or any other Lender and based on the financial
statements referred to herein and such other documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement.  Each Lender also
acknowledges that it will, independently and without reliance upon
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.  Administrative Agent shall not have any duty
or responsibility, either initially or on an ongoing basis, to provide any
Lender with any credit or other similar information regarding any Credit Party.

 

11.5      Indemnification.  Lenders agree to indemnify Administrative
Agent (to the extent not reimbursed by Credit Parties), in accordance with
their respective Aggregate Percentages, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against Administrative Agent in any way
relating to or arising out of this Agreement or any other Loan Document or any
action taken or omitted by Administrative Agent under this Agreement; provided
that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from Administrative Agent’s gross
negligence or willful misconduct. 
Without limitation of the foregoing, each Lender agrees to reimburse
Administrative Agent promptly upon demand for its ratable share, as set forth
above, of any out-of-pocket expenses (including attorneys’ fees) incurred by
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiation, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and each other Loan Document,
to the extent that Administrative Agent is not reimbursed for such expenses by
Credit Parties.  The obligations of
Lenders under this subsection 11.5 shall survive the payment in full of
all Obligations and the termination of this Agreement.  If after payment and distribution of any
amount by Administrative Agent to Lenders, any Lender or any other Person,
including Credit Parties, any creditor of any Credit Party, a liquidator,
administrator or trustee in bankruptcy, recovers from Administrative Agent any
amount found to have been wrongfully paid to Administrative Agent or disbursed
by Administrative Agent to Lenders, then Lenders, in accordance with their
respective Aggregate Percentages, shall reimburse Administrative Agent for all
such amounts.

 

11.6      Rights and Remedies to
Be Exercised by Administrative Agent Only.  Each Lender agrees that, except as set forth
in subsection 10.4, no Lender shall have any right individually
(i) to realize upon the security created by this Agreement or any other
Loan 

 

66

 

Document, (ii) to enforce any provision
of this Agreement or any other Loan Document, or (iii) to make demand
under this Agreement or any other Loan Document.

 

11.7      Agency Provisions Relating
to Collateral.  Each Lender authorizes and ratifies
Administrative Agent’s entry into this Agreement, the Security Documents and
the other Loan Documents for the benefit of Lenders.  Each Lender agrees that any action taken by
Administrative Agent with respect to the Collateral in accordance with the
provisions of this Agreement, the Security Documents or the other Loan
Documents, and the exercise by Administrative Agent of the powers set forth
herein or therein, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all Lenders.  Administrative Agent is hereby authorized on
behalf of all Lenders, without the necessity of any notice to or further consent
from any Lender to take any action with respect to any Collateral or the Loan
Documents which may be necessary to perfect and maintain perfected
Administrative Agent’s Liens upon the Collateral, for its benefit and the
ratable benefit of Lenders.  Lenders
hereby irrevocably authorize Administrative Agent, at its option and in its
sole discretion, to release (or to authorize the release of) any Lien granted
to or held by Administrative Agent upon any Collateral (i) upon
termination of the Agreement and payment and satisfaction of all Obligations;
or (ii) constituting property being sold or disposed of if Credit Parties certify to
Administrative Agent that the sale or disposition is made in compliance with subsection 8.2.8
hereof (and Administrative Agent may rely conclusively on any such certificate,
without further inquiry); or (iii) constituting property in which no
Credit Party owned any interest at the time the Lien was granted or at any time
thereafter; or (iv) in connection with any foreclosure sale or other
disposition of Collateral after the occurrence and during the continuation of
an Event of Default; or (v) if approved, authorized or ratified in writing
by Administrative Agent at the direction of all Lenders; or (vi) if such
release is permitted by the terms of the Intercreditor Agreement.  Upon request by Administrative Agent at any
time, Lenders will confirm in writing Administrative Agent’s authority to
release particular types or items of Collateral pursuant hereto.  Administrative Agent shall have no obligation
whatsoever to any Lender or to any other Person to assure that the Collateral
exists or is owned by any Credit Party or is cared for, protected or insured or
has been encumbered or that the Liens granted to Administrative Agent herein or
pursuant to the Security Documents have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of its
rights, authorities and powers granted or available to Administrative Agent in
this subsection 11.7 or in any of the Loan Documents, it being
understood and agreed that in respect of the Collateral, or any act, omission
or event related thereto, Administrative Agent may act in any manner it may
deem appropriate, in its sole discretion, but consistent with the provisions of
this Agreement, including given Administrative Agent’s own interest in the
Collateral as a Lender and that Administrative Agent shall have no duty or
liability whatsoever to any Lender.

 

11.8      Right to Assign Commitments of Non-Consenting Lenders.  Each Lender grants to Borrower the right to
cause the assignment of all (but not less than all) of such Lender’s Term Loans
and all of its rights and obligations hereunder and under the other Loan
Documents (with the assignment fee to be paid by Borrower in such instance) to 

 

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one or more Eligible Assignees procured by Borrower, which right may be
exercised by Borrower at any time during which no Default shall exist, if such
Lender refuses to execute any amendment, modification, waiver or consent which
requires the written consent of Lenders other than the Majority Lenders and to
which Lenders holding more than 75% of the outstanding Term Loans,
Administrative Agent and Borrower have otherwise agreed; provided that
(a) Borrower shall also replace each other Lender that refuses to consent to
such amendment, modification, waiver or consent, (b) the applicable amendment,
modification, waiver or consent shall become effective upon giving effect to
such assignment and any related assignment required to be effected in
connection therewith and (c) on the effective day of any such assignment
Borrower shall pay to the assigning Lender an amount equal to (i) the aggregate
amount of outstanding Term Loans owed to such Lender, together with all accrued
and unpaid interest, fees and other amounts (other than contingent indemnities)
owed to such Lender and (ii) if at least one other Lender (other than an
Affiliate of or an Approved Fund in respect of such assigning Lender) is being
replaced under the same circumstances giving rise to such assignment in
accordance with the requirements of this subsection, the prepayment premium
that would be payable to such Lender if such assignment were deemed to be a
voluntary prepayment of the Term Loans of such Lender for purposes of
subsection 3.3.6.  Each Lender agrees
that if Borrower exercises its option under this subsection, it shall promptly
execute and deliver all agreements and documentation necessary to effectuate
such assignment as set forth in subsection 11.9.  Borrower shall be entitled (but not
obligated) to execute and deliver such agreements and documentation on behalf
of such non-consenting Lender and any such agreements and documentation so
executed by Borrower shall be effective for all purposes of documenting an
assignment pursuant to subsection 11.9.

 

11.9      Right of Sale, Assignment, Participations.  Each Credit Party hereby consents to any
Lender’s participation, sale, assignment, transfer or other disposition, at any
time or times hereafter, of this Agreement and any of the other Loan Documents,
or of any portion hereof or thereof, including, without limitation, such Lender’s
rights, title, interests, remedies, powers and duties hereunder or thereunder
subject to the terms and conditions set forth below:

 

11.9.1      Sales, Assignments.  Each Lender
hereby agrees that, with respect to any sale or assignment (i) except in
the case of a sale or assignment of the entire remaining amount of the
assigning Lender’s Commitments and the Term Loans at the time owing to it or in
the case of an assignment to a Lender or an Affiliate of a Lender or an
Approved Fund with respect to a Lender, no such sale or assignment shall be for
an amount of less than $1,000,000, (ii) Administrative Agent and, in the
absence of a Default or Event of Default, Borrower, must consent, such consent
not to be unreasonably withheld, delayed or conditioned, to each such
assignment to a Person that is not an original signatory to this Agreement; provided
that no such consent of Administrative Agent or Borrower shall be required with
respect to an assignment to a Lender, any Affiliate of any Lender or any
Approved Fund, (iii) the assigning Lender shall pay to Administrative
Agent a processing and recordation fee of $3,500, provided that no such
fee shall be payable in the case of an assignment to another Lender, an
Affiliate of a Lender or an Approved Fund with respect to a Lender,
(iv) Administrative Agent, the assigning Lender and the assignee Lender
shall each have executed and 

 

68

 

delivered
an Assignment and Acceptance Agreement and (v) such sale or assignment shall be
to an Eligible Assignee.  From and after
the effective date specified in each Assignment and Acceptance Agreement, the
assignee Lender thereupon shall become a “Lender”
for all purposes of this Agreement. 
Notwithstanding the foregoing, (i) except with respect to the
preceding sentence, the provisions of this subsection 11.9.1 shall
not apply to sales or assignments pursuant to subsection 11.8 and
(ii) any Lender may at any time create a security interest in, or pledge,
all or any portion of its rights under and interest in this Agreement in favor
of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR §203.14, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.

 

11.9.2      Participations.  Any Lender
may grant participations in its extensions of credit hereunder to any other
Person (a “Participant”), provided
that (i) no Participant shall thereby acquire any direct rights under this
Agreement, (ii) no Participant shall be granted any right to consent to
any amendment, except to the extent any of the same pertain to
(1) reducing the aggregate principal amount of, or interest rate on, or
fees applicable to, any Term Loan, (2) extending the final stated maturity
of any Term Loan or the stated maturity of any portion of any payment of
principal of, or interest or fees applicable to, any of the Term Loans; provided
that the rights described in this subclause (2) shall not be deemed
to include the right to consent to any amendment with respect to or which has
the effect of requiring any mandatory prepayment of any portion of any Term
Loan or any amendment or waiver of any Default or Event of Default, (3)
releasing all or substantially all of the Collateral or (4) releasing all or
substantially all of the Subsidiary Guarantors from their obligations under
their guarantees hereof, (iii) no sale of a participation in extensions of
credit shall in any manner relieve such Lender of its obligations hereunder,
(iv) such Lender shall remain solely responsible for the performance of
such obligations, (v) Credit Parties and Administrative Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement and the other Loan
Documents and (vi) all amounts payable by Credit Parties hereunder shall
be determined as if such Lender had not sold any such participation.

 

11.9.3      Certain Agreements of Credit Parties. 
Credit Parties agree that (i) they will assist and cooperate with
each Lender in any manner reasonably requested by such Lender to effect the
sale of participation in or assignments of any of the Loan Documents or any
portion thereof or interest therein, including, without limitation, assisting
in the preparation of appropriate disclosure documents and making members of
management available at reasonable times to meet with and answer questions of
potential assignees and Participants; (ii) subject to the provisions of subsection 13.13
hereof, such Lender may disclose credit information regarding Credit Parties to
any potential Participant or assignee; and (iii) upon request, Borrower (at its
expense) shall execute and deliver a Term Note to the assignee Lender.

 

11.9.4      Non U.S. Resident Transferees. 
If, pursuant to this subsection 11.9, any interest in this
Agreement or any Term Loans is transferred to any transferee which is organized
under the laws of any jurisdiction other than the United States or any state or

 

69

 

political
subdivision thereof, the transferor Lender shall cause such transferee (other
than any Participant), and may cause any Participant, concurrently with and as
a condition precedent to the effectiveness of such transfer, to
(i) represent to the transferor Lender (for the benefit of the transferor
Lender, Administrative Agent, and Borrower) that under applicable law and
treaties no taxes will be required to be withheld by Administrative Agent,
Borrower or the transferor Lender with respect to any payments to be made to
such transferee in respect of the interest so transferred, (ii) furnish to
the transferor Lender, Administrative Agent and Borrower either United States
Internal Revenue Service Form W-8BEN or United States Internal Revenue Service
Form W-8ECI (wherein such transferee claims entitlement to complete exemption
from United States federal withholding tax on all payments made hereunder or
under any other Loan Document), and (iii) agree (for the benefit of the
transferor Lender, Administrative Agent and Borrower) to provide the transferor
Lender, Administrative Agent and Borrower a new Form W-8BEN or Form W-8ECI upon
the obsolescence of any previously delivered form and comparable statements in
accordance with applicable United States laws and regulations and amendments
duly executed and completed by such transferee, and to comply from time to time
with all applicable United States laws and regulations with regard to such
withholding tax exemption.

 

11.9.5      Register. 
Administrative Agent shall maintain, on behalf of Borrower, a “register”
for recording the name, address, Obligations and principal and interest owing
to each Lender (which register may be the Loan Account), as well as a copy of
each Assignment and Acceptance Agreement received.  Upon receipt and acceptance of a fully
executed Assignment and Acceptance Agreement, the payment of the processing and
recordation fee specified in subsection 11.9.1 and compliance with the other
provisions set forth in this Agreement, Administrative Agent shall record in
the register each Eligible Assignee party to an Assignment and Acceptance
Agreement as a Lender under this Agreement, subject to the terms thereunder.  The entries in such register shall be
presumptive evidence of the amounts due and owing to each Lender in the absence
of manifest error.  Borrower,
Administrative Agent and each Lender shall treat each Person whose name is
recorded in such register pursuant to the terms hereof as a Lender for all
purposes of this Agreement.  The
Obligations are registered and the right, title and interest of any Lender and
its assignees in and to such Obligations shall be transferable only upon
notation of such transfer in the register (and each Term Note shall expressly
so provide).  This subsection 11.9.5  shall be construed so that the Obligations
are at all times maintained in “registered form” within the meaning of Sections
163(f), 871(h)(2) and 881(c)(2) of the Code and any related regulations.  The register described herein shall be
available for inspection by Borrower or any Lender, at any reasonable time upon
reasonable prior notice.

 

11.10    Amendment.  No amendment or waiver of any provision of
this Agreement or any other Loan Document (including without limitation any
Term Note), nor consent to any departure by any Credit Party therefrom, shall
in any event be effective unless the same shall be approved in writing and
signed by the Majority Lenders (or signed by Administrative Agent with the
written consent of the Majority Lenders) and Borrower and acknowledged in
writing by Administrative Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which 

 

70

 

given; provided,
that no amendment, waiver or consent shall be effective, unless
(i) approved in writing and signed by each Lender, to do any of the
following:  (1) increase the aggregate
Term Loan Commitment, (2) reduce the principal of, or interest on, any amount
payable hereunder (including any fees) or under any Term Note, other than those
payable only to BofA in its capacity as Administrative Agent, which may be
reduced by BofA unilaterally, (3) decrease any interest rate or amount of
interest payable hereunder, (4) extend the maturity of the Term or postpone any
date fixed for any payment of principal of, or interest on, any amounts payable
hereunder (including any fees) or under any Term Note, other than those payable
only to BofA in its capacity as Administrative Agent, which may be postponed by
BofA unilaterally, (5) reduce the number of Lenders that shall be required for
Lenders or any of them to take any action hereunder, (6) release or discharge
Borrower from the Obligations or release or discharge any Person liable for the
performance of any obligations of any Credit Party hereunder or under any of
the Loan Documents, (7) amend any provision of this Agreement that requires the
consent of all Lenders or consent to or waive any breach thereof, (8) amend the
definition of the term Majority Lenders, (9) amend subsection 3.4.2
or this subsection 11.10, (10) release any substantial portion of the
Collateral, unless otherwise permitted pursuant to subsection 11.7
hereof or the Intercreditor Agreement, (11) permit the sale, assignment or
transfer by any Credit Party of its interest in this Agreement or any of the
Obligations, or any portion thereof, including, without limitation, such Credit
Party’s rights, title, interests, remedies, powers and duties hereunder or (12)
subordinate any Lien of Administrative Agent in any material portion of the
Collateral to the Lien of any other Person (other than the holders of the First
Lien Debt); or (ii) approved in writing and signed by Administrative Agent
in addition to the Lenders required above to affect the rights or duties of
Administrative Agent under this Agreement, any Term Note or any other Loan
Document.  If a fee is to be paid by any
Credit Party in connection with any waiver or amendment hereunder, the
agreement evidencing such amendment or waiver may, at the sole discretion of
Administrative Agent (but shall not be required to), provide that only Lenders
executing such agreement by a specified date may share in such fee (and in such
case, such fee shall be divided among the applicable Lenders on a pro rata
basis without including the interests of any Lenders who have not timely
executed such agreement).

 

11.11    Resignation of Administrative Agent; Appointment of Successor.  Administrative Agent may resign as
Administrative Agent by giving not less than thirty (30) days’ prior written
notice to Lenders and Borrower.  If
Administrative Agent shall resign under this Agreement, then, subject to the
consent of Borrower (which consent shall not be unreasonably withheld and which
consent shall not be required during any period in which a Default or an Event
of Default exists), Majority Lenders shall appoint from among Lenders a
successor agent for Lenders or (ii) if a successor agent shall not be so
appointed and approved within the thirty (30) day period following
Administrative Agent’s notice to Lenders and Borrower of its resignation, then
Administrative Agent shall appoint a successor agent who shall serve as Administrative
Agent until such time as Majority Lenders appoint a successor agent, subject to
Borrower’s consent as set forth above, provided that if Administrative
Agent shall notify Borrower and the Lenders that no qualifying Person has
accepted such appointment, then such resignation shall nonetheless become
effective in accordance with such notice and (1) the retiring 

 

71

 

Administrative
Agent shall be discharged from its duties and obligations hereunder and under
the other Loan Documents (except that in the case of any Collateral held by the
Administrative Agent on behalf of the Lenders under any of the Loan Documents,
the retiring Administrative Agent shall continue to hold such Collateral until
such time as a successor Administrative Agent is appointed) and (2) all
payments, communications and determinations provided to be made by, to or
through Administrative Agent shall instead be made by or to each Lender
directly, until such time as the Majority Lenders appoint a successor
Administrative Agent as provided for above in this subsection 11.11.  Upon its appointment, such successor agent
shall succeed to the rights, powers and duties of Administrative Agent and the
term “Administrative Agent” shall
mean such successor effective upon its appointment, and the former
Administrative Agent’s rights, powers and duties as Administrative Agent shall
be terminated without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement.  After the resignation of any Administrative
Agent hereunder, the provisions of this Section 11 shall inure to
the benefit of such former Administrative Agent and such former Administrative
Agent shall not by reason of such resignation be deemed to be released from
liability for any actions taken or not taken by it while it was an
Administrative Agent under this Agreement.

 

11.12    Audit and
Examination Reports; Disclaimer by Lenders. 
By signing this Agreement, each Lender:

 

(i)            is deemed to have requested that Administrative Agent
furnish such Lender, promptly after it becomes available, a copy of each audit
or examination report (each a “Report”
and collectively, “Reports”)
prepared by or on behalf of Administrative Agent;

 

(ii)           expressly agrees and acknowledges that Administrative
Agent (i) does not make any representation or warranty as to the accuracy
of any Report, and (ii) shall not be liable for any information contained
in any Report;

 

(iii)          expressly agrees and acknowledges that the Reports are
not comprehensive audits or examinations, that Administrative Agent or other
party performing any audit or examination will inspect only specific
information regarding Credit Parties and will rely significantly upon Credit
Parties’ books and records, as well as on representations of Credit Parties’
personnel;

 

(iv)          agrees to keep all Reports confidential and strictly
for its internal use and not to distribute Reports, in each case except in
accordance with the provisions of subsection 13.13; and

 

(v)           without limiting the generality of any other
indemnification provision contained in this Agreement, agrees:  (i) to hold Administrative Agent and any
such other Lender preparing a Report harmless from any action the indemnifying
Lender may take or conclusion the indemnifying Lender may reach or draw from
any Report in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to Credit Parties, or the indemnifying
Lender’s participation in, or 

 

72

 

the indemnifying
Lender’s purchase of, a loan or loans of Credit Parties; and (ii) to pay
and protect, and indemnify, defend and hold Administrative Agent and any such
other Lender preparing a Report harmless from and against, the claims, actions,
proceedings, damages, costs, expenses and other amounts (including attorneys’
fees and expenses) incurred by Administrative Agent and any such other Lender
preparing a Report as the direct or indirect result of any third parties who
might obtain all or part of any Report through the indemnifying Lender.

 

11.13    Syndication Agent.  Each Lender hereby designates Bear, Stearns
& Co. Inc. as the Syndication Agent. 
Except as expressly set forth in subsection 9.1 and this Section
11, Syndication Agent, in its capacity as such, shall have no rights,
powers, duties or responsibilities and no rights, powers, duties or
responsibilities shall be read into this Agreement or any other Loan Document
or otherwise exist on behalf of or against such entity, in its capacity as
such.  If the Syndication Agent resigns
as such agent, no successor syndication agent shall be appointed.

 

11.14    No
Reliance on Administrative Agent’s Customer Identification Program.  Each Lender acknowledges and agrees that
neither such Lender, nor any of its affiliates, participants or assignees, may
rely on Administrative Agent to carry out such Lender’s, affiliate’s,
participant’s or assignee’s customer identification program, or other
obligations required or imposed under or pursuant to the USA Patriot Act or the
regulations thereunder, including the regulations contained in 31 CFR 103.121
(as hereafter amended or replaced, the “CIP
Regulations”), or any other Anti-Terrorism Law, including any
programs involving any of the following items relating to or in connection with
the Credit Parties, their affiliates or agents, the Loan Documents or the
transactions hereunder:  (1) any identity
verification procedures, (2) any record keeping, (3) any comparisons with
government lists, (4) any customer notices or (5) any other procedures required
under the CIP Regulations or such other laws.

 

11.15    USA Patriot Act.  Each Lender or assignee or participant of a
Lender that is not organized under the laws of the United States of America or
a state thereof (and is not excepted from the certification requirement
contained in Section 313 of the USA Patriot Act and the applicable regulations
because it is both (i) an affiliate of a depository institution or foreign bank
that maintains a physical presence in the United States or foreign country, and
(ii) subject to supervision by a banking authority regulating such affiliated
depository institution or foreign bank) shall deliver to Administrative Agent
the certification, or, if applicable, recertification, certifying that such
Lender is not a “shell” and certifying to other matters as required by Section
313 of the USA Patriot Act and the applicable regulations:  (1) within ten (10) days after the Closing
Date and (2) at such other times as are required under the USA Patriot Act.

 

11.16    Withholding.  To the extent required by any applicable law,
Administrative Agent may withhold from any interest payment to any Lender an
amount equivalent to any applicable withholding tax.  If the IRS or any other Governmental
Authority asserts a claim that Administrative Agent did not properly withhold
tax from amounts paid to or for the account of any Lender because the
appropriate form was not delivered or was not properly executed or because such
Lender failed to notify Administrative Agent of a 

 

73

 

change in
circumstance which rendered the exemption from, or reduction of, withholding
tax ineffective or for any other reason, such Lender shall indemnify
Administrative Agent fully for all amounts paid, directly or indirectly, by
Administrative Agent as tax or otherwise, including any penalties or interest
and together with all expenses (including legal expenses, allocated internal
costs and out-of-pocket expenses) incurred.

 

SECTION 12.  GUARANTY

 

12.1      Guaranty

 

12.1.1      Each of the Subsidiary Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guaranties to the Administrative
Agent, for the ratable benefit of the Secured Parties and their respective
successors, indorsees, transferees and assigns, the prompt and complete payment
and performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations of the Borrower and each other
Subsidiary Guarantor.

 

12.1.2      If and to the extent required in order for the
Obligations of any Subsidiary Guarantor to be enforceable under applicable
federal, state and other laws relating to the insolvency of debtors, the
maximum liability of such Subsidiary Guarantor hereunder shall be limited to
the greatest amount which can lawfully be guaranteed by such Subsidiary
Guarantor under such laws, after giving effect to any rights of contribution,
reimbursement and subrogation arising under Section 12.2.  Each Subsidiary Guarantor acknowledges and
agrees that, to the extent not prohibited by applicable law, (i) such
Subsidiary Guarantor (as opposed to its creditors, representatives of creditors
or bankruptcy trustee, including such Subsidiary Guarantor in its capacity as
debtor in possession exercising any powers of a bankruptcy trustee) has no
personal right under such laws to reduce, or request any judicial relief that
has the effect of reducing, the amount of its liability under this Agreement,
(ii) such Subsidiary Guarantor (as opposed to its creditors, representatives of
creditors or bankruptcy trustee, including such Subsidiary Guarantor in its
capacity as debtor in possession exercising any powers of a bankruptcy trustee)
has no personal right to enforce the limitation set forth in this Section 12.1.2
or to reduce, or request judicial relief reducing, the amount of its liability
under this Agreement, and (iii) the limitation set forth in this Section
12.1.2 may be enforced only to the extent required under such laws in order
for the obligations of such Subsidiary Guarantor under this Agreement to be
enforceable under such laws and only by or for the benefit of a creditor,
representative of creditors or bankruptcy trustee of such Subsidiary Guarantor
or other person entitled, under such laws, to enforce the provisions thereof.

 

12.1.3      Each Subsidiary Guarantor agrees that the Obligations
may at any time and from time to time be incurred or permitted in an amount
exceeding the maximum liability of such Subsidiary Guarantor under Section
12.1.2 without impairing the guaranty contained in this Section 12 or
affecting the rights and remedies of any Secured Party hereunder.

 

74

 

12.1.4      The guaranty contained in this Section 12 shall
remain in full force and effect until payment in full in cash of the
Obligations (other than contingent indemnification obligations not yet due and
payable), notwithstanding that from time to time during the term of this
Agreement and the other Loan Documents the Borrower may be free from any
Obligations.

 

12.1.5      No payment made by the Borrower, any of the Subsidiary
Guarantors, any other guarantor or any other person or received or collected by
any Secured Party from the Borrower, any of the Subsidiary Guarantors, any
other guarantor or any other person by virtue of any action or proceeding or
any set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify,
reduce, release or otherwise affect the liability of any Subsidiary Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by such Subsidiary Guarantor in respect of the Obligations or any payment
received or collected from such Subsidiary Guarantor in respect of the
Obligations), remain liable for the Obligations up to the maximum liability of
such Subsidiary Guarantor hereunder until the Obligations are paid in full in
cash and this Agreement has terminated.

 

12.2      Rights
of Reimbursement, Contribution and Subrogation.  In case any payment is made on account of the
Obligations by any Credit Party or is received or collected on account of the
Obligations from any Credit Party or its property:

 

12.2.1      If such payment is made by the Borrower or from its
property, then, if and to the extent such payment is made on account of
Obligations arising from or relating to a Term Loan, the Borrower shall not be
entitled (i) to demand or enforce reimbursement or contribution in respect of
such payment from any other Credit Party or (ii) to be subrogated to any claim,
interest, right or remedy of any Secured Party against any other person,
including any other Credit Party or its property.

 

12.2.2      If such payment is made by a Subsidiary Guarantor or
from its property, such Subsidiary Guarantor shall be entitled, subject to and
upon payment in full of the Obligations (other than contingent indemnification
obligations not yet due and payable), (i) to demand and enforce reimbursement
for the full amount of such payment from the Borrower and (ii) to demand and
enforce contribution in respect of such payment from each other Subsidiary
Guarantor that has not paid its fair share of such payment, as necessary to
ensure that (after giving effect to any enforcement of reimbursement rights
provided hereby) each Subsidiary Guarantor pays its fair share of the
unreimbursed portion of such payment. 
For this purpose, the fair share of each Subsidiary Guarantor as to any
unreimbursed payment shall be determined based on an equitable apportionment of
such unreimbursed payment among all Subsidiary Guarantors based on the relative
value of their assets and any other equitable considerations deemed appropriate
by a court of competent jurisdiction.

 

12.2.3      If and whenever (after payment in full of the
Obligations) any right of reimbursement or contribution becomes enforceable by
any Credit Party against any other Credit Party under Sections 12.2.1 or
12.2.2, such Credit Party shall be entitled, 

 

75

 

subject
to and upon payment in full of the Obligations (other than contingent
indemnification obligations not yet due and payable), to be subrogated (equally
and ratably with all other Credit Parties entitled to reimbursement or
contribution from any other Credit Party as set forth in this Section 12.2)
to any security interest that may then be held by the Administrative Agent upon
any Collateral granted to it in this Agreement. 
Such right of subrogation shall be enforceable solely against the Credit
Parties, and not against the Secured Parties, and neither the Administrative
Agent nor any other Secured Party shall have any duty whatsoever to warrant,
ensure or protect any such right of subrogation or to obtain, perfect,
maintain, hold, enforce or retain any Collateral for any purpose related to any
such right of subrogation.  If
subrogation is demanded by any Credit Party, then (after payment in full of the
Obligations (other than contingent indemnification obligations not yet due and
payable)) the Administrative Agent shall deliver to the Credit Parties making
such demand, or to a representative of such Credit Parties or of the Credit
Parties generally, an instrument satisfactory to the Administrative Agent transferring,
on a quitclaim basis without any recourse, representation, warranty or
obligation whatsoever, whatever security interest the Administrative Agent then
may hold in whatever Collateral may then exist that was not previously released
or disposed of by the Administrative Agent.

 

12.2.4      All rights and claims arising under this Section
12.2 or based upon or relating to any other right of reimbursement,
indemnification, contribution or subrogation that may at any time arise or
exist in favor of any Credit Party as to any payment on account of the
Obligations made by it or received or collected from its property shall be
fully subordinated in all respects to the prior payment in full of all of the
Obligations (other than contingent indemnification obligations not yet due and
payable).  Until payment in full of the
Obligations (other than contingent indemnification obligations not yet due and
payable), no Credit Party shall demand or receive any collateral security, payment
or distribution whatsoever (whether in cash, property or securities or
otherwise) on account of any such right or claim.  If any such payment or distribution is made
or becomes available to any Credit Party in any bankruptcy case or
receivership, insolvency or liquidation proceeding, such payment or
distribution shall be delivered by the person making such payment or
distribution directly to the Administrative Agent, for application to the
payment of the Obligations.  If any such
payment or distribution is received by any Credit Party, it shall be held by
such Credit Party in trust, as trustee of an express trust for the benefit of
the Secured Parties, and shall forthwith be transferred and delivered by such
Credit Party to the Administrative Agent, in the exact form received and, if
necessary, duly endorsed.

 

12.2.5      The obligations of the Credit Parties under the Loan
Documents, including their liability for the Obligations and the enforceability
of the security interests granted thereby, are not contingent upon the
validity, legality, enforceability, collectibility or sufficiency of any right
of reimbursement, contribution or subrogation arising under this Section
12.2.  The invalidity, insufficiency,
unenforceability or uncollectibility of any such right shall not in any respect
diminish, affect or impair any such obligation or any other claim, interest,
right or remedy at any time held by any Secured Party against any Credit Party
or its property.  The Secured Parties
make no 

 

76

 

representations
or warranties in respect of any such right and shall have no duty to assure,
protect, enforce or ensure any such right or otherwise relating to any such
right.

 

12.2.6      Each Credit Party reserves any and all other rights of
reimbursement, contribution or subrogation at any time available to it as
against any other Credit Party, but (i) the exercise and enforcement of such
rights shall be subject to Section 12.2.4 and (ii) neither the
Administrative Agent nor any other Secured Party shall ever have any duty or
liability whatsoever in respect of any such right, except as provided in Section
12.2.3.

 

12.2.7      The undertaking by each Credit Party to repay the
Obligations and each representation, warranty or covenant of each Credit Party
are and shall be joint and several.  This
subsection 12.2 is intended only to define the relative rights of
Credit Parties, and nothing set forth in subsection 12.2 is
intended or shall impair the obligations of each Credit Party, jointly and
severally, to pay to Administrative Agent and Lenders the Obligations as and
when the same shall become due and payable in accordance with the terms
hereof.  Notwithstanding anything to the
contrary set forth in this subsection 12.2 or any other provisions
of this Agreement, it is the intent of the parties hereto that the liability
incurred by each Credit Party in respect of the Obligations of
the other Credit Parties (and any Lien granted by each Credit
Party to secure such Obligations), not constitute a fraudulent
conveyance or fraudulent transfer under the provisions of any applicable law of
any state or other governmental unit (“Fraudulent
Conveyance”).  Consequently,
each Credit Party, Administrative Agent and each Lender hereby agree that if a
court of competent jurisdiction determines that the incurrence of liability by
any Credit Party in respect of the Obligations of any other Credit Party (or
any Liens granted by such Credit Party to secure such Obligations) would, but
for the application of this sentence, constitute a Fraudulent Conveyance, such
liability (and such Liens) shall be valid and enforceable only to the maximum
extent that would not cause the same to constitute a Fraudulent Conveyance, and
this Agreement and the other Loan Documents shall automatically be deemed to
have been amended accordingly, nunc pro tunc.

 

12.3      Amendments, etc. with respect to the Obligations.  Each Subsidiary Guarantor shall remain
obligated hereunder notwithstanding that, without any reservation of rights
against any Subsidiary Guarantor and without notice to or further assent by any
Subsidiary Guarantor, any demand for payment of any of the Obligations made by
any Secured Party may be rescinded by such Secured Party and any of the
Obligations continued, and the Obligations, or the liability of any other
person upon or for any part thereof, or any collateral security or guaranty
therefor or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, increased, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by any Secured Party,
and this Agreement and the other Loan Documents and any other documents
executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the parties thereto may
deem advisable from time to time, and any collateral security, guaranty or
right of offset at any time held by any Secured Party for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released.  No Secured Party shall have any obligation 

 

77

 

to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Obligations or for the guaranty contained in this Section 12 or any
property subject thereto.

 

12.4      Guaranty Absolute and Unconditional  Each Subsidiary Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Obligations
and notice of or proof of reliance by any Secured Party upon the guaranty
contained in this Section 12 or acceptance of the guaranty
contained in this Section 12; the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon the guaranty contained
in this Section 12; and all dealings between the Borrower and any
of the Subsidiary Guarantors, on the one hand, and the Secured Parties, on the
other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon the guaranty contained in this Section 12.  Each Subsidiary Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Borrower or any of the Subsidiary Guarantors with respect to the
Obligations.  Each Subsidiary Guarantor
understands and agrees that the guaranty contained in this Section 12
shall be construed as a continuing, absolute and unconditional guaranty of
payment and performance without regard to (a) the validity or enforceability of
the Credit Agreement or any other Loan Document, any of the Obligations or any
other collateral security therefor or guaranty or right of offset with respect
thereto at any time or from time to time held by any Secured Party, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance hereunder) which may at any time be available to or be asserted by
the Borrower or any other person against any Secured Party, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the Borrower
or such Subsidiary Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Borrower for the
Obligations, or of such Subsidiary Guarantor under the guaranty contained in
this Section 12, in bankruptcy or in any other instance.  When making any demand hereunder or otherwise
pursuing its rights and remedies hereunder against any Subsidiary Guarantor,
any Secured Party may, but shall be under no obligation to, make a similar
demand on or otherwise pursue such rights and remedies as it may have against
the Borrower, any other Subsidiary Guarantor or any other person or against any
collateral security or guaranty for the Obligations or any right of offset with
respect thereto, and any failure by any Secured Party to make any such demand,
to pursue such other rights or remedies or to collect any payments from the
Borrower, any other Subsidiary Guarantor or any other person or to realize upon
any such collateral security or guaranty or to exercise any such right of
offset, or any release of the Borrower, any other Subsidiary Guarantor or any
other person or any such collateral security, guaranty or right of offset,
shall not relieve any Subsidiary Guarantor of any obligation or liability hereunder,
and shall not impair or affect the rights and remedies, whether express,
implied or available as a matter of law, of any Secured Party against any
Subsidiary Guarantor.  For the purposes
hereof “demand” shall include the commencement and continuance of any legal
proceedings.

 

12.5      Payments.  Each Subsidiary Guarantor hereby guaranties
that payments hereunder will be paid to the Administrative Agent without
set-off or counterclaim in 

 

78

 

United States
dollars in immediately available funds at the office of the Administrative
Agent as specified herein.

 

SECTION 13.  MISCELLANEOUS

 

13.1      Power of Attorney.  Each Credit Party hereby irrevocably
designates, makes, constitutes and appoints Administrative Agent (and all
Persons designated by Administrative Agent) as such Credit Party’s true and
lawful attorney (and agent-in-fact), solely with respect to the matters set
forth in this subsection 13.1, and Administrative Agent, or
Administrative Agent’s agent, may, without notice to any Credit Party and in
any Credit Party’s or Administrative Agent’s name, but at the cost and expense
of Borrower:

 

13.1.1      At such time or times as Administrative Agent or said
agent, in its sole discretion, may determine, endorse any Credit Party’s name
on any checks, notes, acceptances, drafts, money orders or any other evidence
of payment or proceeds of the Collateral which come into the possession of
Administrative Agent or under Administrative Agent’s control.

 

13.1.2      At such time or times upon or after the occurrence and
during the continuance of an Event of Default (provided that the occurrence of
an Event of Default shall not be required with respect to clauses (iv),
(vi), (viii), and (ix) below), as Administrative Agent or
its agent in its sole discretion may determine: (i) demand payment of the
Accounts from the Account Debtors, enforce payment of the Accounts by legal
proceedings or otherwise, and generally exercise all of any Credit Party’s
rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts
or other Collateral or any legal proceedings brought to collect any of the
Accounts or other Collateral; (iii) sell or assign any of the Accounts and
other Collateral upon such terms, for such amounts and at such time or times as
Administrative Agent deems advisable, and at Administrative Agent’s option,
with all warranties regarding the Collateral disclaimed; (iv) take
control, in any manner, of any item of payment or proceeds relating to any
Collateral; (v) prepare, file and sign any Credit Party’s name to a proof
of claim in bankruptcy or similar document against any Account Debtor or to any
notice of lien, assignment or satisfaction of lien or similar document in
connection with any of the Collateral; (vi) receive, open and dispose of
all mail addressed to any Credit Party and notify postal authorities to change
the address for delivery thereof to such address as Administrative Agent may
designate; (vii) endorse the name of any Credit Party upon any of the
items of payment or proceeds relating to any Collateral and deposit the same to
the account of Administrative Agent on account of the Obligations;
(viii) endorse the name of any Credit Party upon any chattel paper,
document, instrument, invoice, freight bill, bill of lading or similar document
or agreement relating to the Accounts, Inventory and any other Collateral;
(ix) use any Credit Party’s stationery and sign the name of any Credit
Party to verifications of the Accounts and notices thereof to Account Debtors;
(x) use the information recorded on or contained in any data processing
equipment and Computer Hardware and Software 

 

79

 

relating
to the Accounts, Inventory, Equipment and any other Collateral; (xi) make
and adjust claims under policies of insurance; and (xii) do all other acts
and things necessary, in Administrative Agent’s determination, to fulfill any
Credit Party’s obligations under this Agreement.

 

The power of attorney granted hereby shall constitute a power coupled
with an interest and shall be irrevocable.

 

13.2      Indemnity.  Each Credit Party hereby agrees to defend,
indemnify and hold Administrative Agent, Syndication Agent, the Joint Lead
Arrangers and each Lender and each of its respective officers, directors,
employees, counsel, representatives, agents, attorneys in fact and Affiliates
(each, an “Indemnitee”) harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and
disbursements (including, without limitation, reasonable attorneys’ fees) of
any kind or nature whatsoever which may at any time (including at any time
following repayment of the Term Loans and the termination, resignation or
replacement of Administrative Agent or replacement of any Lender)  be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any insolvency, bankruptcy
or similar proceeding) related to or arising out of this Agreement, any other
Loan Document, the Term Loans, or the use of the proceeds thereof, or the
Collateral whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the “Indemnified
Liabilities”); provided, that no Credit Party shall have any
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities resulting solely from (x) the gross negligence or willful
misconduct of such Indemnitee as determined by a final non-appealable (or the
time to appeal for which has run) judgment of a court of competent jurisdiction
or (y) a claim brought by such Credit Party against such Indemnified Person for
breach in bad faith of such Indemnified Person’s obligations hereunder, if such
Credit Party has obtained a final non-appealable (or the time to appeal for
which has run) judgment in its favor on such claim as determined by a court of
competent jurisdiction.  Without limiting
the generality of the foregoing, these indemnities shall extend to any claims
asserted against any Indemnitee by any Person under any Environmental Laws by
reason of any Credit Party’s or any other Person’s failure to comply with laws
applicable to solid or hazardous waste materials or other toxic
substances.  Notwithstanding any contrary
provision in this Agreement, the obligation of each Credit Party under this subsection 13.2
shall survive the payment in full of the Obligations and the termination of
this Agreement.

 

13.3 Severability.  Wherever 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 only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.

 

80

 

13.4      Successors and Assigns.  This Agreement, the Other Agreements and the
Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of each Credit Party, Administrative Agent and each
Lender permitted under subsection 11.9 hereof.  Notwithstanding anything to the contrary
herein, no Credit Party may sell, assign or otherwise transfer any of its
interest in this Agreement or any of the Obligations, or any portion thereof,
including, without limitation, such Credit Party’s rights, title, interests,
remedies, powers and duties hereunder, unless such sale, assignment or other
transfer is approved in a writing signed by each Lender and Administrative
Agent; provided that this subsection shall not prohibit mergers of
Credit Parties that are expressly permitted by subsection 8.2.1.

 

13.5      Cumulative
Effect; Conflict of Terms.  The provisions of the Other Agreements and
the Security Documents are hereby made cumulative with the provisions of this
Agreement.  Except as otherwise provided
in any of the other Loan Documents by specific reference to the applicable
provision of this Agreement, if any provision contained in this Agreement is in
direct conflict with, or inconsistent with, any provision in any of the other
Loan Documents (other than, as it relates to the Collateral, the Intercreditor
Agreement), the provision contained in this Agreement shall govern and control.

 

13.6      Execution
in Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same
instrument.

 

13.7      Notice.  Except as otherwise provided herein, all
notices, requests and demands to or upon a party hereto or pursuant to any
other Loan Document, to be effective, shall be in writing, and shall be sent by
certified or registered mail, return receipt requested, by personal delivery
against receipt, by overnight courier or by facsimile and, unless otherwise
expressly provided herein, shall be deemed to have been validly served, given,
delivered or received immediately when delivered against receipt, three (3)
Business Days’ after deposit in the mail, postage prepaid, one (1) Business Day
after deposit with an overnight courier or, in the case of facsimile notice,
when sent with respect to machine confirmed, addressed as follows:

 

	
  (A)          If to Administrative Agent:

  	
  Bank of America, N.A.

  Agency Management

  Mail Code: CA5-701-05-19

  Attention:  Charles Graber

  Telephone:  415 436-3495

  Facsimile:  415 503-5006

  Email: 
  charles.graber@bankofamerica.com

  

 

81

 

	
  With a copy to:

  	
  Bank of America, N.A.

  
	
   

  	
  Agency Management

  
	
   

  	
  Mail Code: NC1-007-13-06

  
	
   

  	
  Attention: Laura Clark

  
	
   

  	
  Telephone: 704 388-6415

  
	
   

  	
  Facsimile: 704 409-0564

  
	
   

  	
  Email:
  laura.l.clark@bankofamerica.com

  
	
   

  	
  Agency Management

  
	
   

  	
   

  
	
  And a copy to:

  	
  Latham & Watkins LLP

  
	
   

  	
  885 Third Avenue

  
	
   

  	
  New York, New York 10022

  
	
   

  	
  Attention: Michele Penzer

  
	
   

  	
  Facsimile No.: (212) 751-4864

  
	
   

  	
   

  
	
  (B)           If to any Credit Party:

  	
  c/o NES Rentals Holdings, Inc

  
	
   

  	
  8770 West Bryn Mawr

  
	
   

  	
  4th Floor

  
	
   

  	
  Chicago, Illinois 60631

  
	
   

  	
  Attention: Chief Financial
  Officer

  
	
   

  	
  Facsimile No.: (773) 714-0650

  
	
   

  	
   

  
	
  With a copy to:

  	
  Kirkland & Ellis LLP

  
	
   

  	
  200 East Randolph Drive

  
	
   

  	
  Chicago, Illinois 60601

  
	
   

  	
  Attention: H. Kurt von
  Moltke, P.C.

  
	
   

  	
  Facsimile No.: (312) 861-2200

  

 

(C)           If
to any Lender, at its address indicated on the signature pages hereof or in an
Assignment and Acceptance Agreement,

 

or to such other address as each party may designate for itself by
notice given in accordance with this subsection 13.7; provided,
however, that any notice, request or demand to or upon Administrative
Agent or a Lender pursuant to subsection 3.1.1 or 4.2.2
hereof shall not be effective until received by Administrative Agent or such
Lender.

 

13.8      Consent.  Whenever Administrative Agent’s, Majority
Lenders’ or all Lenders’ consent is required to be obtained under this
Agreement, any of the Other Agreements or any of the Security Documents as a
condition to any action, inaction, condition or event, except as otherwise
specifically provided herein, Administrative Agent, Majority Lenders or all
Lenders, as applicable, shall be authorized to give or withhold such consent in
its or their sole discretion and to condition its or their consent upon the
giving of additional Collateral security for the Obligations, the payment of
money or any other matter.

 

13.9      Credit Inquiries.  Each Credit Party hereby authorizes and
permits Administrative Agent and each Lender to respond to usual and customary
credit inquiries from third parties concerning any Credit Party or any of its
Subsidiaries.

 

82

 

13.10    Time of Essence.  Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.

 

13.11    Entire Agreement.  This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by
the parties in connection therewith or with reference thereto, embody the
entire understanding and agreement between the parties hereto and thereto with
respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and inducements, whether express or implied, oral or
written.

 

13.12    Interpretation.  No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.

 

13.13    Confidentiality.  Administrative Agent and each Lender shall
hold all nonpublic information obtained pursuant to the requirements of this
Agreement in accordance with Administrative Agent’s and such Lender’s customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure (i) to its Affiliates, (ii) as reasonably required by a
participant or assignee or prospective participant or assignee in connection
with the participation or assignment or contemplated participation or
assignment and shall require any such participant to agree to comply with this subsection 13.13
or (iii) as required or requested by any governmental authority or
representative thereof or pursuant to legal process.

 

13.14    GOVERNING
LAW; CONSENT TO FORUM. 
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.  AS PART
OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR
FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF ANY CREDIT PARTY,
ADMINISTRATIVE AGENT OR ANY LENDER, EACH CREDIT PARTY HEREBY CONSENTS AND
AGREES THAT THE COURTS OF THE STATE OF NEW YORK, OR, AT ADMINISTRATIVE AGENT’S
OPTION, THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK,
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN ANY CREDIT PARTY ON THE ONE HAND AND ADMINISTRATIVE AGENT OR ANY LENDER
ON THE OTHER HAND PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF
OR RELATED TO THIS AGREEMENT.  EACH
CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY
WAIVES ANY OBJECTION WHICH ANY CREDIT PARTY MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM  NON  CONVENIENS
AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT.  EACH
CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE 

 

83

 

OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN
THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF ANY CREDIT PARTY’S ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN
THE U.S. MAILS, PROPER POSTAGE PREPAID. 
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT
OF ADMINISTRATIVE AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT OR ANY LENDER OF ANY
JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

 

13.15    WAIVERS
BY CREDIT PARTIES. 
EACH CREDIT PARTY WAIVES (i) THE RIGHT TO TRIAL BY JURY (WHICH
ADMINISTRATIVE AGENT AND EACH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE
LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (ii) PRESENTMENT,
DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT,
MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL
COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS , CHATTEL
PAPER AND GUARANTIES AT ANY TIME HELD BY ADMINISTRATIVE AGENT OR ANY LENDER ON
WHICH ANY CREDIT PARTY MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND
CONFIRMS WHATEVER ADMINISTRATIVE AGENT OR ANY LENDER MAY DO IN THIS REGARD; (iii) NOTICE
PRIOR TO ADMINISTRATIVE AGENT’S TAKING POSSESSION OR CONTROL OF THE COLLATERAL
OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING
ADMINISTRATIVE AGENT TO EXERCISE ANY OF ADMINISTRATIVE AGENT’S REMEDIES;
(iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS;
(v) NOTICE OF ACCEPTANCE HEREOF; AND (vi) EXCEPT AS PROHIBITED BY
LAW, ANY RIGHT TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES.  EACH CREDIT PARTY ACKNOWLEDGES
THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO ADMINISTRATIVE AGENT’S
AND EACH LENDER’S ENTERING INTO THIS AGREEMENT AND THAT ADMINISTRATIVE AGENT
AND EACH LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS
WITH EACH CREDIT PARTY.  EACH CREDIT
PARTY WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH
ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  IN 

 

84

 

THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

 

13.16    Advertisement.  Each Credit Party hereby authorizes Administrative Agent
to publish the name of Credit Parties and the amount of the credit facility
provided hereunder in any “tombstone”
or comparable advertisement which Administrative Agent elects to publish.

 

13.17    References to Intercreditor Agreement.  References to the Intercreditor Agreement
herein are intended to define the relative rights and obligations of
Administrative Agent and Lenders vis-à-vis the holders of the First Lien Debt
only and shall not impart any rights upon any Credit Party.

 

13.18    Recovery.  To the extent any payment received by
Administrative Agent or any Lender with respect to the Obligations (whether by
or on behalf of any Credit Party or any other person, as proceeds of security,
enforcement of any right of setoff or otherwise) is declared to be a fraudulent
conveyance or a preference in any respect, set aside or required to be paid to
any Credit Party (a “Recovery”), then the Obligation or part thereof originally
intended to be satisfied (and any guaranty in respect thereof pursuant to Section 12
or otherwise) shall be deemed to be reinstated and outstanding as if such
payment had not occurred and, if this Agreement shall have been terminated
prior to such Recovery, this Agreement shall be reinstated in full force and
effect, and such prior termination shall not diminish, release, discharge,
impair or otherwise affect the obligations of any Credit Party from such date
of reinstatement.

 

(Signature Pages Follow)

 

85

 

IN WITNESS WHEREOF, this Agreement has been duly executed on the day
and year specified at the beginning of this Agreement.

 

	
   

  	
  Borrower:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NES RENTALS HOLDINGS, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Other Credit Parties:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NATIONAL EQUIPMENT SERVICES, INC.

  	
   

  
	
   

  	
  NES REAL ESTATE MANAGEMENT, INC.

  	
   

  
	
   

  	
  NES IT SERVICES, INC.

  	
   

  
	
   

  	
  NES EQUIPMENT SERVICES CORPORATION

  	
   

  
	
   

  	
  REBEL STUDIO RENTALS, INC.

  	
   

  
	
   

  	
  NES SHORING ACQUISITION, INC.

  	
   

  
	
   

  	
  NES MANAGEMENT SERVICE CORPORATION

  	
   

  
	
   

  	
  NES INDIANA PARTNERS, INC.

  	
   

  
	
   

  	
  FALCONITE REBUILD CENTER, INC.

  	
   

  
	
   

  	
  NES PARTNERS, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NES TRAFFIC SAFETY, L.P.

  	
   

  
	
   

  	
  NES EQUIPMENT RENTAL, L.P.

  	
   

  
	
   

  	
  By: NES INDIANA PARTNERS, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NES COMPANIES, L.P.

  	
   

  
	
   

  	
   

  	
  By: NES PARTNERS, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
										

 

S-1

 

	
   

  	
  BANK OF AMERICA, N.A.

  
	
    

  	
  as Administrative Agent

  
	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							

 

S-2

 

	
   

  	
  BEAR, STEARNS & CO. INC., as

  
	
   

  	
  Syndication Agent

  
	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

S-3

APPENDIX A

 

GENERAL
DEFINITIONS

 

When used in the Loan and Security Agreement dated as of August 17,
2004, by and among NES Rentals Holdings, Inc., as borrower, certain
subsidiaries of NES Rentals Holdings, Inc., as subsidiary guarantors, the
financial institutions party thereto, as lenders, Bear, Stearns & Co. Inc.,
as syndication agent and Bank of America, N.A., as administrative agent, (a)
the terms Account, Certificated Security, Chattel Paper, Commercial Tort Claims, Deposit Account, Document, Electronic Chattel
Paper, Equipment, Financial Asset, Fixture, General Intangibles,
Goods, Instruments, Investment
Property, Letter-of-Credit Rights,
Money, Payment Intangibles, Proceeds, Securities
Account, Security Entitlement, Software, Supporting
Obligations, Tangible Chattel
Paper and Uncertificated
Security have the respective meanings assigned thereto under the
UCC; (b) all terms reflecting Collateral having the meanings assigned thereto
under the UCC shall be deemed to mean such Property, whether now owned or
hereafter created or acquired by any Credit Party or in which such Credit Party
now has or hereafter acquires any interest; (c) capitalized terms which are not
otherwise defined in this Appendix A have the respective meanings assigned
thereto in said Loan and Security Agreement; and (d) the following terms shall
have the following meanings (terms defined in the singular to have the same
meaning when used in the plural and vice versa):

 

Account Debtor - any
Person who is or may become obligated under, or in connection with, or on
account of, any Account, Contract Right, Chattel Paper, General Intangible or
any Supporting Obligation in respect thereof.

 

Administrative Agent
- as defined in the preamble to the Agreement, together with its successors and
assigns.

 

Affiliate - a
Person: (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
a Person; (ii) which beneficially owns or holds 10% or more of any class
of the Voting Stock of a Person; or (iii) 10% or more of the Voting Stock
(or in the case of a Person which is not a corporation, 10% or more of the
equity interest) of which is beneficially owned or held by a Person or a
Subsidiary of a Person.  For purposes of
this definition, “control” of a Person means the power, directly or indirectly,
to direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.

 

Aggregate Percentage
- with respect to each Lender, the percentage equal to the quotient of
(i) such Lender’s Term Loan Commitment divided by (ii) the
aggregate of all Term Loan Commitments, provided, that, if the aggregate
Term Loan Commitments have been reduced to zero, the numerator shall be the
aggregate unpaid principal amount of such Lender’s Term Loans and the
denominator shall be the aggregate unpaid principal amount of all Term Loans.

 

A-1

 

Agreement - the Loan
and Security Agreement referred to in the first sentence of this Appendix A,
all Exhibits and Schedules thereto and this Appendix A, as each of the same may
be amended, restated, supplemented or otherwise modified from time to time.

 

ALTA Survey - a
survey prepared in accordance with the standards adopted by the American Land
Title Association and the American Congress on Surveying and Mapping in 1997,
known as the “Minimum Standard Detail
Requirements of Land Title Surveys”. 
The ALTA Survey shall be in sufficient form to satisfy the requirements
of Chicago Title Insurance Company to provide extended coverage over survey
defects and shall also show the location of all easements, utilities, and
covenants of record, dimensions of all improvements, encroachments from any
adjoining property, and certify as to the location of any flood plain area
affecting the subject real estate.  The
ALTA Survey shall contain the following certification:  “To [Name
of Applicable Credit Party], Bank of America, N.A., as
Administrative Agent, and                        Title
Insurance Company.  This is to certify
that this map of plat and the survey on which it is based were made in
accordance with the “Minimum Standard Detail Requirements for Land Title
Surveys” jointly established and adopted by ALTA and ACSM in 1997.  (signed (SEAL) License No.                     .”

 

Anti-Terrorism Law  - the USA Patriot Act or any other statute,
regulation, executive order, or other law pertaining to the prevention of
future acts of terrorism, in each case as such law may be amended from time to
time.

 

Applicable Margin –
(i) with respect to the Base Rate Portion, 5.00% and (ii) with respect to
the LIBOR Portion, 6.00%.

 

Approved Fund - any
Person (other than a natural person) that is (or will be) engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar
extensions of credit in the ordinary course of its business and that is
administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii)
an entity or an Affiliate of an entity that administers or manages a Lender.

 

Assignment and Acceptance Agreement
- an assignment and acceptance agreement entered into by a Lender and an
Eligible Assignee (with the consent of any party whose consent is required by subsection
11.9.1) and accepted by Administrative Agent in substantially the form of Exhibit
10 or any other form approved by Administrative Agent.

 

Audit – an
audit,  inspection, valuation or field
examination of the Properties (including the books and records) of Credit
Parties and their Subsidiaries or the Collateral performed by Administrative
Agent or its representative, which may include making extracts from such books
and records and discussing with the officers, employees and independent
accounts of any Credit Party or its Subsidiary, the business, assets, liabilities,
financial condition, business prospects and results of operations of such
Credit Party or Subsidiary.

 

A-2

 

Available Liquidity
– the sum of Availability (as defined in the First Lien Debt Documents as in
effect on the date hereof) plus cash in deposit accounts meeting either of the
following conditions: (x) such deposit account is maintained at BofA and is
subject to a first priority security interest in favor of the First Lien Debt
Agent subject only to bankers liens (including those liens described in clause
(xiii) of subsection 8.2.5) and liens junior to the lien of the First Lien Debt
Agent that are permitted to be incurred under the First Lien Debt Documents (as
in existence on the date hereof) or (y) such deposit account is maintained
with any other bank or financial institution and is (i) subject to a first
priority security interest in favor of the First Lien Debt Agent subject only
to bankers liens (including those liens described in clause (xiii) of subsection
8.2.5) and liens junior to the lien of the First Lien Debt Agent that are
permitted to be incurred under the First Lien Debt Documents (as in existence
on the date hereof) and (ii) subject to a control agreement in favor of
the First Lien Debt Agent.

 

Base Rate – as of
any date of determination, the greater of (i) the Prime Rate and (ii) the Fed
Funds Rate plus .50% per annum.

 

Base Rate Portion -
that portion of the Term Loan that is not subject to a LIBOR Option.

 

Blocked Person – as defined
in subsection 7.1.31(ii) of the Agreement.

 

BofA – as defined in
the preamble to the Agreement.

 

Borrower – as
defined in the preamble to the Agreement.

 

Business Day - any
day excluding Saturday, Sunday and any day which is a legal holiday under the
laws of the State of Wisconsin, the State of Illinois or the State of New York
or is a day on which banking institutions located in any of such states are
closed, provided that with respect to the borrowing, prepayment or continuation
of, or determination of the interest rate on, any LIBOR Portion, Business Day
shall include a London Banking Day.

 

Capital Expenditures
– cash expenditures made for the acquisition or improvement of capital assets
as determined in accordance with GAAP.

 

Capitalized Lease Obligation
- any Indebtedness represented by obligations under a lease that is required to
be capitalized for financial reporting purposes in accordance with GAAP.

 

Cash Equivalents –
those investments set forth in clauses (iv) through (vii) of the definition of “Restricted
Investment”.

 

Change of Control –
each occurrence of any of the following:

 

(a)           the acquisition,
directly or indirectly, by any Person or group (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) (other 

 

A-3

 

than any Permitted Holder) of beneficial
ownership of more than 20% of the aggregate outstanding Voting Stock of
Borrower;

 

(b)           during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of Borrower (together with any new directors
whose election by such Board of Directors or whose nomination for election by
the shareholders of Borrower was approved by a vote of at least a majority the
directors of Borrower then still in office who were either directors at the
beginning of such period, or whose election or nomination for election was
previously approved) cease for any reason to constitute a majority of the Board
of Directors of Borrower;

 

(c)           Borrower shall cease
to have beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended), directly or indirectly, of 100% of the
aggregate Voting Stock of each other Credit Party and its Subsidiaries, free
and clear of all Liens (other than any Liens granted under the Loan Documents
and Permitted Liens), except to the extent resulting from a transaction
specifically permitted under subsection 8.2.1 of the Agreement; and

 

(d)           any “Change of
Control” (or similar term) as defined in the First Lien Debt Documents shall
occur.

 

Closing Date –
August 17, 2004.

 

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

 

Collateral - all of
the Property and interests in Property described in Section 5 of
the Agreement, and all other Property and interests in Property that now or
hereafter secure or purport to secure the payment and performance of any of the
Obligations.

 

Collateral Asset Base
– as at any date of determination thereof, solely to the extent that Administrative
Agent has a perfected security interest in the following, an amount equal to
the sum of (without duplication):

 

(i)            the
Gross Orderly Liquidation Value of Eligible Rental Equipment Inventory, plus

 

(ii)           Accounts
receivable appearing on the Consolidated balance sheet of the Borrower and its
Subsidiaries less the amount of reserves in respect thereof set forth on such
Consolidated balance sheet, plus

 

(iii)          75%
of the value of Inventory (other than Rental Equipment Inventory) on the
Consolidated balance sheet of the Borrower and its Subsidiaries less the amount
of reserves in respect thereof set forth on such Consolidated balance sheet.

 

Collateral Coverage Ratio
– at any date, the ratio of (i) aggregate Funded Senior Debt (as defined in Exhibit
8.3) of Borrower and its Subsidiaries on a Consolidated basis 

 

A-4

 

as of such date minus all cash of Credit
Parties as of such date in which Administrative Agent holds a perfected
security interest (subject only to Permitted Liens) to (ii) the Collateral
Asset Base as of such date.

 

Collection Account –
as defined in subsection 6.2.4 of the Agreement.

 

Collection Bank– as
defined in subsection 6.2.4 of the Agreement.

 

Compliance Certificate
- as defined in subsection 8.1.3 of the Agreement.

 

Computer Hardware and Software
- all of any Credit Party’s rights (including rights as licensee and lessee)
with respect to (i) 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; (ii) all Software and all software programs designed
for use on the computers and electronic data processing hardware described in clause
(i) above, including all operating system software, utilities and
application programs in any form (source code and object code in magnetic tape,
disk or hard copy format or any other listings whatsoever); (iii) any
firmware associated with any of the foregoing; and (iv) any documentation
for hardware, Software and firmware described in clauses (i), (ii)
and (iii) above, including flow charts, logic diagrams, manuals,
specifications, training materials, charts and pseudo codes.

 

Consolidated - the
consolidation in accordance with GAAP of the accounts or other items as to
which such term applies.

 

Contaminant - any
waste, pollutant, hazardous substance, toxic substance, hazardous waste,
special waste, petroleum or petroleum-derived substance or waste, asbestos in
any form or condition, polychlorinated biphenyls (“PCBs”), or any constituent of any such substance or waste.

 

Contingent Obligation
- with respect to any Person, any obligation of such Person guaranteeing or
intended to guaranty any Indebtedness, leases, dividends or other obligations (“primary obligations”) of any other Person
(the “primary obligor”) in any
manner, whether directly or indirectly, including, without limitation, (i) the
direct or indirect guaranty, endorsement (other than for collection or deposit
in the ordinary course of business), co-making, discounting with recourse or
sale with recourse by such Person of the obligation of a primary obligor, (ii)
the obligation to make take-or-pay or similar payments, if required, regardless
of nonperformance by any other party or parties to an agreement, (iii) any
obligation of such Person, whether or not contingent, (A) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (B) to advance or supply funds (1) for the purchase or payment of any
such primary obligation or (2) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (C) to purchase property, assets, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make 

 

A-5

 

payment of such primary obligation or (D)
otherwise to assure or hold harmless the holder of such primary obligation
against loss in respect thereof; provided, however, that the term
“Contingent Obligation” shall not
include any product warranties extended in the ordinary course of
business.  The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation with respect to which such Contingent
Obligation is made (or, if less, the maximum amount of such primary obligation
for which such Person may be liable pursuant to the terms of the instrument
evidencing such Contingent Obligation) or, if not stated or determinable, the
maximum reasonably anticipated liability with respect thereto (assuming such
Person is required to perform thereunder), as determined by such Person in good
faith.

 

Contract Right - any
right of any Credit Party to payment under a contract for the sale or lease of
goods or the rendering of services, which right is at the time not yet earned
by performance.

 

Credit Facility -
means, with respect to any Credit Party or any Subsidiary of any Credit Party,
one or more debt facilities, debt securities sales arrangements or commercial
paper facilities, in each case with, or sold to, banks or other institutional
lenders or investors providing for term loans or other Indebtedness, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part, and without limitation as to amount, terms, conditions,
covenants and other provisions from time to time, and any agreement (and
related documents and instruments) governing Indebtedness incurred to
refinance, in whole or in part, the borrowings and commitments then outstanding
or permitted to be outstanding under such debt or successor debt, whether by
the same or any other lender or investor or group of lenders or investors.

 

Credit Party – each
of Borrower and each Subsidiary Guarantor.

 

Current Assets - at
any date means the amount at which all of the current assets of a Person would
be properly classified as current assets shown on a balance sheet at such date
in accordance with GAAP.

 

Default - an event
or condition the occurrence of which would, with the lapse of time or the
giving of notice, or both, become an Event of Default.

 

Default Rate - as
defined in subsection 2.1.2 of the Agreement.

 

Derivative Obligations
– every obligation of a Person under any forward contract, futures contract,
exchange contract, swap, option or other financing agreement or arrangement
(including, without limitation, caps, floors, collars and similar agreements),
the value of which is dependent upon interest rates, currency exchange rates,
commodity values, equity values or other indices.

 

Disqualified Capital Stock – shall mean any Security which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, (a) matures or
is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or is redeemable at the option of the holder thereof, 

 

A-6

 

in whole or in part, on or
prior to the first anniversary of the last day of the Term, (b) is convertible
into or exchangeable for (i) debt securities or (ii) any Securities referred to
in (a) above, in each case at any time prior to the first anniversary of the
last day of the Term, (c) contains any repurchase obligation which may come
into effect prior to payment in full of all Obligations, (d) requires cash
Distributions prior to one year after the last day of the Term, (e) does not
provide that any claims of any holder of such Security may have against any
Credit Party (including any claims as a judgment creditor or other creditor in
respect of claims for the breach of any covenants contained therein) shall be
fully subordinated (including a full remedy bar) to the Obligations in a manner
satisfactory to the Majority Lenders, (f) provides the holders of such Security
thereof with any rights to receive any cash upon the occurrence of a change of
control prior to the first anniversary of the date on which the Obligations
have been paid in full in cash, unless the rights to receive such cash are
contingent upon the prior payment in full in cash of the Obligations or (g) is
prohibited by the terms of the Agreement.

 

Distribution - in
respect of any Person means and includes: (i) the direct or indirect
payment of any dividends or other distributions on Securities (except
distributions in such Securities) and (ii) the repurchase, redemption,
retirement, defeasance, sinking fund or similar payment or other purchase or
acquisition for value of Securities of such Person, as the case may be.

 

DOL - the United
States Department of Labor or any successor department or agency.

 

Dominion Notice – as
defined in subsection 6.2.4 of the Agreement.

 

Eligible Assignee - (a)
any Lender, any Affiliate of any Lender and any Approved Fund. (b) any other
Person (i) which is a commercial bank, finance company, insurance company or
other financial institution or fund and which, in the ordinary course of
business, extends credit of the type contemplated herein; (ii) which is
organized under the laws of the United States of America or any state thereof;
and (iii) which has capital in excess of $500,000,000, provided, however, that “Eligible
Assignee” shall not include any Credit Party or any of its Affiliates,
financial sponsors or Subsidiaries or (c) any other Person consented to by
Administrative Agent and, in the absence of a Default or Event of Default,
Borrower (such consent not to be unreasonably withheld, delayed or
conditioned).

 

Eligible Rental Equipment Inventory
– Rental Equipment Inventory of any Credit Party (other than packaging
materials and supplies, tooling, samples and literature).  Without limiting the generality of the
foregoing, no Rental Equipment Inventory shall be Eligible Rental Equipment
Inventory if:

 

(i)            it is not finished
goods which meet the specifications of the purchase order or contract for such
Rental Equipment Inventory, if any; or

 

(ii)           it is not in good,
new and saleable or leasable condition; or

 

A-7

 

(iii)          it is slow-moving,
obsolete or unmerchantable; or

 

(iv)          it does not meet all
standards imposed by any governmental agency or authority; or

 

(v)           it does not conform
in all respects to any covenants, warranties and representations set forth in
the Agreement; or

 

(vi)          it is not at all
times subject to Administrative Agent’s duly perfected security interest or is
subject to a Lien that is not a Permitted Lien; or

 

(vii)         it is not situated
at a location in compliance with the Agreement, provided that Rental
Equipment Inventory situated at a location not owned by a Credit Party will be
Eligible Rental Equipment Inventory only if Administrative Agent has received a
satisfactory landlord’s agreement or bailee letter, as applicable, with respect
to such location; or

 

(viii)        it is in transit; or

 

(ix)           it is held on
consignment; or

 

(x)            it is not insured
in accordance with the terms of the Agreement or other terms reasonably
acceptable to Administrative Agent.

 

Environmental Claims - all
complaint, summons, citation, notice of violation, directive, order, claim,
litigation, investigation, judicial or administrative proceeding, judgment,
letter or other written communication from any Governmental Authority or other
Person alleging potential liability or responsibility for violation of any
Environmental Law, or for a Release or injury to the environment.

 

Environmental Laws -
all federal, state or local laws, statutes, common law duties, rules,
regulations, ordinances and codes, together with all administrative orders,
directed duties, licenses, authorizations and permits of, and agreements with,
any Governmental Authority, in each case relating to environmental, health,
safety and land use matters.

 

Environmental Lien - a
Lien in favor of any  Governmental
Authority for (a) any liability under Environmental Laws, or (b) damages
arising from, or costs incurred by such Governmental Authority in response to,
a Release or threatened Release of a Contaminant into the environment.

 

ERISA - the Employee
Retirement Income Security Act of 1974, as amended, and any successor statute,
and all rules and regulations from time to time promulgated thereunder.

 

ERISA Affiliate - any
trade or business (whether or not incorporated) under common control with any Credit
Party within the meaning of Section 414(b) or (c) of the 

 

A-8

 

Code (and Sections 414(m) and (o) of the Code
for purposes of provisions relating to Section 412 of the Code).

 

ERISA Event – means
(a) a Reportable Event with respect to a Pension Plan, (b) a withdrawal by any
Credit Party or any ERISA Affiliate from a Pension Plan subject to Section 4063
of ERISA during a plan year in which it was a substantial employer (as defined
in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated
as such a withdrawal under Section 4062(e) of ERISA, (c) a complete or partial
withdrawal by any Credit Party or any ERISA Affiliate from a Multiemployer Plan
or notification that a Multiemployer Plan is in reorganization, (d) the filing
of a notice of intent to terminate, the treatment of a Pension Plan amendment
as a termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan, (e)
the occurrence of an event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan,
or (f) the imposition of any material liability under Title IV of ERISA, other
than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
any Credit Party or any ERISA Affiliate.

 

Event of Default -
as defined in subsection 10.1 of the Agreement.

 

Excess Cash Flow -
with respect to the period beginning July 1, 2004 and ending December 31, 2005
and each fiscal year of Borrower and its Subsidiaries thereafter, the amount
equal to the sum of Consolidated Net Income (Loss) (as defined in Exhibit
8.3), plus depreciation, amortization and other non-cash charges
deducted in determining Consolidated Net Income (Loss) and minus the sum
of payments of principal on Indebtedness for Money Borrowed (excluding payments
made on the Closing Date in respect of the Prior Indebtedness and repayments of
revolving loans except to the extent the applicable revolving loan commitments
are permanently reduced in connection with such repayments), non-cash income
included in determining Consolidated Net Income (Loss) and Net Capital
Expenditures for such period or fiscal year, as applicable, all determined for
Borrower and its Subsidiaries on a Consolidated basis in accordance with GAAP.

 

Excluded Deposit Accounts
– accounts which are solely used when and as needed for the purposes of making
payroll, replenishing petty cash, payment of specified amounts payable and
other occasional corporate needs in the ordinary course of business, so long as
the balance in any such account does not exceed $100,000 at any time and the aggregate
balances in all such accounts do not exceed $200,000 at any time.

 

Fed Funds Rate - for
any day, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such day; provided that (a) if
such day is not a Business Day, the Fed Funds Rate for such day shall be such
rate on such transactions on the next preceding Business Day as so published on
the next 

 

A-9

 

succeeding Business Day, and (b) if no such
rate is so published on such next succeeding Business Day, the Fed Funds Rate
for such day shall be the average rate charged to Administrative Agent on such
day on such transactions as determined by Administrative Agent.

 

Fee Letter - as
defined in subsection 2.3 of the Agreement.

 

First Lien Debt –
any Indebtedness (to the extent permitted under subsection 8.2.3(ix) of
the Agreement) under any Credit Facility of any Credit Party in respect of
which the related First Lien Debt Agent has become a party to the Intercreditor
Agreement on behalf of itself and the lenders or other debtholders under such
Credit Facility, which Indebtedness is secured by Liens on all or any portion
of the Collateral that are prior to the Liens securing the Obligations.

 

First Lien Debt Agent -
at any time in respect of any Credit Facility, the Person serving at such time
as the “Agent,” “Administrative Agent,” “Collateral Agent,”  “Collateral Trustee” or “Trustee” under such
Credit Facility or any other representative in a similar capacity then most
recently designated in accordance with the applicable provisions of the Credit
Facility, together with its successors in such capacity.

 

First Lien Debt Documents –
any and all agreements, instruments and other documents pursuant to which the
First Lien Debt has been or will be issued or otherwise setting forth the terms
of the First Lien Debt, including the First Lien Debt Security Documents, any
guaranty agreements, bank product agreements or hedging agreements related
thereto, all ancillary agreements as to which the First Lien Agent or any
lender is a party or a beneficiary and all other agreements, instruments,
documents and certificates executed in connection with any of the foregoing, in
each case as such agreement, instrument or other document may be amended,
restated, supplemented, refunded, replaced or otherwise modified from time to
time in accordance with the terms thereof, but only to the extent permitted
under the terms of the Loan Documents.

 

First Lien Debt Security Documents -
all security agreements, pledge agreements, collateral assignments, mortgages,
collateral agency agreements, control agreements, deeds of trust or other
grants or transfers for security executed and delivered by any Credit Party or
any Subsidiary of any Credit Party or any guarantor of the First Lien Debt
creating (or purporting to create) a Lien upon any assets or properties of such
Person in favor of the First Lien Debt Agent, in each case, as amended,
modified, renewed, restated or replaced, in whole or in part, from time to time,
in accordance with its terms, but only to the extent permitted under the terms
of the Loan Documents.

 

First Lien Loan and Security Agreement
– that certain loan and security agreement, dated as of the date hereof, as
amended, restated, supplemented, refunded, replaced or otherwise modified from
time to time to the extent permitted under the terms of the Loan Documents, by
and among (i) NES Rentals Holdings, Inc. and certain subsidiaries of NES
Rentals Holdings, Inc., as borrowers, (ii) the financial institutions party
thereto from time to time as lenders, (iii) Wachovia Bank, National Association
as syndication agent and (iv) Bank of America, N.A. as administrative agent.

 

A-10

 

Foreign Plan – any
material pension, retirement, retiree benefit or similar plan, arrangement or
policy sponsored or contributed to by any Credit Party in a jurisdiction other
than the United States.

 

Foreign Subsidiary –
as defined in subsection 5.1 of the Agreement.

 

GAAP - generally
accepted accounting principles in the United States of America in effect from
time to time.

 

Governmental Authority
- any nation or government, any state or other political subdivision thereof,
any central bank (or similar monetary or regulatory authority) thereof, any
department, commission, board, bureau, instrumentality or agency thereof, any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any corporation or
other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.

 

Gross Orderly Liquidation Value
- as to Rental Equipment Inventory, the orderly liquidation value of such
Rental Equipment Inventory as set forth in the most recent inventory appraisal
relating thereto delivered to and accepted by Administrative Agent in
accordance with the terms of the Agreement.

 

Hoist Business Unit
– the business of the Borrower of renting certain hoist equipment as currently
conducted by NES Industrial Hoist.

 

Inactive Subsidiary
– a Subsidiary of any Credit Party, which Subsidiary (x) does not conduct or
engage in any business or operations, and (y) has assets and properties with an
aggregate book value of not greater than $10,000, and liabilities in an
aggregate amount not greater than $10,000 and (z) has aggregate revenues not
greater than $10,000 during any twelve-month period.

 

Indebtedness - as
applied to a Person means, without duplication:

 

(i) all obligations of such Person for borrowed money,
(ii) all obligations of such Person evidenced by bonds (other than
performance, surety or similar bonds), debentures, notes or similar
instruments, or upon which interest payments are customarily made,
(iii) all obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person (other than
customary reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (iv) all obligations of
such Person issued or assumed as the deferred purchase price of property or
services purchased by such Person (other than trade debt incurred in the
ordinary course of business and due within 180 days of the incurrence thereof),
(v) the principal portion of all obligations of such Person under
Capitalized Lease Obligations, (vi) the maximum amount of all letters of
credit issued or bankers’ acceptances facilities created for the account of
such Person and, without duplication, all drafts drawn thereunder (to the
extent unreimbursed), (vii) all preferred Securities issued by such Person
and required by the terms thereof to be redeemed, or for which mandatory
sinking fund payments are due, by a fixed date prior to 180 days following the
applicable maturity date thereof, (viii) the principal portion of all 

 

A-11

 

obligations of such Person under off-balance
sheet financing arrangements (other than leases which, in accordance with GAAP,
would be classified as operating leases), (ix) all Contingent Obligations of
such Person, (x) all Derivative Obligations of such Person, (xi) to the extent
not included in the foregoing clauses (i) through (x), all items which in
accordance with GAAP would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Person as at the date as
of which Indebtedness is to be determined, (xii) all Indebtedness of another
Person of the type referred to in clauses (i) through (xi)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on, or payable out
of the proceeds of production from, property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed, and (xii)
Indebtedness of the type referred to in clauses (i) through (xi)
above of any partnership or unincorporated joint venture in which such Person
is legally obligated or has a reasonable expectation of being liable with
respect thereto.

 

Indemnified Liabilities –
as defined in subsection 13.2 of the Agreement.

 

Indemnitee – as
defined in subsection 13.2 of the Agreement.

 

Intellectual Property
- all past, present and future:  trade
secrets, know-how and other proprietary information; trademarks, internet
domain names, service marks, trade dress, trade names, business names, designs,
logos, slogans (and all translations, adaptations, derivations and combinations
of the foregoing) 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; copyrights (including copyrights for computer programs)
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, unpatented inventions (whether or
not patentable); patent applications and patents; industrial design
applications and registered industrial designs; license agreements related to
any of the foregoing and income therefrom; books, records, writings, computer
tapes or disks, flow diagrams, specification sheets, computer software, source
codes, object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; the
right to sue for all past, present and future infringements of any of the
foregoing; all other intellectual property; and all common law and other rights
throughout the world in and to all of the foregoing.

 

Intercreditor Agreement
- that certain Intercreditor Agreement by and between Administrative Agent and
First Lien Debt Agent, as acknowledged by Credit Parties substantially in the
form of Exhibit 8.4 attached hereto and otherwise in form and
substance satisfactory to Majority Lenders, as amended, restated, supplemented
or otherwise modified from time to time.

 

Interest Period - as
applicable to any LIBOR Portion, a period commencing on the date such LIBOR
Portion is advanced, continued or converted, and ending on the date which is
one (1) month, two (2) months, three (3) months, or six (6) months later, as
may 

 

A-12

 

then be requested by Borrower; provided
that unless Administrative Agent notifies Borrower that the initial syndication
of the Term Loan commitments have been completed, each Interest Period
commencing (a) within the first 60 days after the Closing Date shall be a
period of 1 month and (b) thereafter shall be a period of 7 days; and provided
further that (i) any Interest Period which would otherwise end on a
day which is not a Business Day shall end in the next preceding or succeeding
Business Day as is Administrative Agent’s custom in the market to which such
LIBOR Portion relates; (ii) there remains a minimum of one (1) month, two
(2) months, three (3) months, or six (6) months (depending upon which Interest
Period Borrower selects) in the Term, unless Credit Parties and Lenders have
agreed to an extension of the Term beyond the expiration of the Interest Period
in question; (iii) all Interest Periods of the same duration which
commence on the same date shall end on the same date; and (iv) with
respect to any LIBOR Term Portion, no applicable Interest Period shall extend
beyond the scheduled installment payment date for such LIBOR Term Portion.

 

Inventory – as
defined in the UCC and including, without limitation, all of each Credit Party’s
Property which is rented by such Credit Party in the ordinary course of
business or is held for rent by such Credit Party.

 

IRS - the Internal
Revenue Service and any Governmental Authority succeeding to any of its
principal functions under the Code.

 

Joint Lead Arrangers
– each of Banc of America Securities LLC and Bear, Stearns & Co. Inc.

 

Lender – as defined
in the preamble to the Agreement.

 

LIBOR - as
applicable to any LIBOR Portion, for the applicable Interest Period, the rate
per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”),
as published by Reuters (or other commercially available source providing
quotations of BBA LIBOR as designated by the Administrative Agent from time to
time) at approximately 11:00 a.m., London time, two (2) Business Days prior to
the commencement of such Interest Period, for deposits in U.S. dollars (for
delivery on the first day of such Interest Period) with a term equivalent to
such Interest Period.  If such rate is
not available at such time for any reason, then “LIBOR” for such Interest
Period shall be the rate per annum determined by Administrative Agent to be the
rate at which deposits in U.S. dollars for delivery on the first day of such
Interest Period in same day funds in the approximate amount of the LIBOR
Portion being made, continued or converted by BofA and with a term equivalent
to such Interest Period would be offered by BofA’s London Branch to major banks
in the London interbank eurodollar market at their request at approximately 11:00
a.m. (London time) two (2) Business Days prior to the commencement of such
Interest Period.  In the event that the
Board of Governors of the Federal Reserve System shall impose a Reserve
Percentage with respect to LIBOR deposits of BofA, then for any period during
which such Reserve Percentage shall apply, LIBOR shall be equal to the amount
determined above divided by an amount equal to 1 minus the Reserve Percentage.

 

A-13

 

LIBOR Interest Payment Date
– with respect to a LIBOR Portion, the last day of the Term and the last day of
each Interest Period applicable to such LIBOR Portion,  provided, however, that if any Interest
Period for a LIBOR Portion exceeds three months, the respective dates that fall
every three months after the beginning of such Interest Period shall also be
Interest Payment Dates.

 

LIBOR Option - the
option granted pursuant to subsection 3.1 of the Agreement to have
the interest on all or any portion of the principal amount of the Term Loan
based on the LIBOR.

 

LIBOR Portion - that
portion of the Term Loan specified in a LIBOR Request which, as of the date of
the LIBOR Request specifying such LIBOR Term Portion, has met the conditions
for basing interest on the LIBOR in subsection 3.1 of the Agreement
and the Interest Period of which has not terminated.

 

LIBOR Request - a
notice in writing (or by telephone confirmed electronically or by telecopy or
other facsimile transmission on the same day as the telephone request) and in
the Form of Exhibit 3.1.7) from Borrower to Administrative Agent
requesting that interest on all or any portion of the Term Loan be based on the
LIBOR, specifying: (i) the first day of the Interest Period (which shall
be a Business Day); (ii) the length of the Interest Period;
(iii) whether the LIBOR Portion is a new Term Loan, a conversion of a Base
Rate Portion, or a continuation of a LIBOR Portion; and (iv) the dollar
amount of the LIBOR Portion, which shall be in an amount not less than
$5,000,000 or an integral multiple
of $1,000,000 in excess thereof.

 

Lien - any interest
in Property securing an obligation owed to, or a claim by, a Person other than
the owner of the Property, whether such interest is based on common law,
statute or contract, including without limitation, any mortgage, deed of trust,
pledge, lien (statutory or otherwise), security interest, charge or other
encumbrance or security or preferential arrangement of any nature, any
conditional sale or title retention arrangement, any capital lease, reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property and any assignment, deposit arrangement or financing lease intended
as, or having the effect of, security. 
For the purpose of the Agreement, a Credit Party shall be deemed to be the owner of any Property
which it has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.

 

Loan Account - the
loan account established on the books of Administrative Agent pursuant to subsection 3.6
of the Agreement.

 

Loan Documents - the
Agreement, the Other Agreements and the Security Documents.

 

London Banking Day -
any date on which commercial banks are open for business in London, England.

 

A-14

 

Majority Lenders –
as of any date, Lenders holding more than 50% of the outstanding Term Loans.

 

Margin Stock - “margin
stock” as such term is defined in Regulation T, U  or X of the Federal Reserve Board.

 

Material Adverse Effect
- a material adverse effect on (i) the business, assets, liabilities (actual or
contingent), results of operations or financial condition of Credit Parties and
their Subsidiaries taken as a whole, (ii)  the rights and remedies of
Administrative Agent or Lenders under the Loan Documents, (iii)  the
ability of any Credit Party or any of its Subsidiaries to perform its
obligations hereunder or under any Loan Document, (iv) the legality, validity
or enforceability of the Agreement or any other Loan Document or (v) the
validity, perfection or priority of any Lien in favor of Administrative Agent
on any Collateral.

 

Material Contract -
with respect to any Person, each contract or agreement to which any Credit
Party is a party as to which the breach, nonperformance, cancellation or
failure to renew by any party thereto could reasonably be expected to have a
Material Adverse Effect.

 

Maximum Rate – as
defined in subsection 2.1.3 of the Agreement.

 

Money Borrowed -
(i) Indebtedness arising from the lending of money by any Person to any
Credit Party or any of its Subsidiaries; (ii) Indebtedness, whether or not
in any such case arising from the lending by any Person of money to any Credit
Party or any of its Subsidiaries, (1) which is represented by notes
payable or drafts accepted that evidence extensions of credit, (2) which
constitutes obligations evidenced by bonds, debentures, notes or similar
instruments, or (3) upon which interest charges are customarily paid
(other than accounts payable) or that was issued or assumed as full or partial
payment for Property; (iii) Indebtedness that constitutes a Capitalized Lease
Obligation; (iv) reimbursement obligations with respect to letters of
credit or guaranties of letters of credit and (v) Indebtedness of any
Credit Party or any of its Subsidiaries under any guaranty of obligations that
would constitute Indebtedness for Money Borrowed under clauses (i)
through (iii) hereof, if owed directly by Borrower or any of its
Subsidiaries.  Money Borrowed shall not
include trade payables or accrued expenses.

 

Mortgages – each
mortgage or deed of trust executed by a Credit
Party on or about the Closing Date in favor of Administrative Agent, for
the benefit of itself and Lenders, by which such Credit Party has granted to Administrative Agent, as security
for the Obligations, a Lien upon the real Property of such Credit Party described therein,
together with all mortgages, deeds of trust and comparable documents now or at
any time hereafter securing the whole or any part of the Obligations.

 

Motor Vehicle  -
any motor vehicle or other Property (including, without limitation, all trucks,
trailers, tractors, service vehicles, automobiles and other mobile equipment
and any Rental Equipment Inventory) for which the title to such motor vehicle
or Property is governed by a certificate of title or ownership.

 

A-15

 

Multiemployer Plan -
a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA which is
contributed to (or required to be contributed to) by any Credit Party or any
ERISA Affiliate.

 

Net Capital
Expenditures
– with respect to any period, cash expenditures made for the acquisition or
improvement of capital assets during such period, as determined in accordance
with GAAP, net of (i) to the extent any asset sale proceeds were reinvested in
the acquisition or improvement of capital assets during such period, the
portion of such expenditures made with the proceeds of such asset sales up to a
maximum amount equal to the sum of the net book value of the assets sold plus
up to $15,000,000 of proceeds in excess of the net book value of the assets sold
and (ii) to the extent any acquisition or improvement of capital assets during
such period were financed with Indebtedness (other than the Obligations or the
First Lien Debt), the portion of such expenditures made with the proceeds of
such Indebtedness.

 

Net Cash Proceeds  -with respect to (a) any sale,
assignment, transfer or other disposition of any Property (an “Asset Disposition”) by any Credit Party or
any of its Subsidiaries, all proceeds in the form of cash or cash equivalents
received by such Credit Party or Subsidiary from or in respect of such Asset
Disposition (including any cash proceeds received as income or other proceeds
of any noncash proceeds of such Asset Disposition and including any insurance
payment or condemnation award in respect of any assets of such Credit Party or
Subsidiary), (b) any issuance of Securities or Indebtedness (a “Capital Issuance”) by any Credit Party or
any of its Subsidiaries, all cash proceeds received in respect thereof and (c) any
loss of, damage to or destruction of, or any condemnation or other taking for
public use of, any Property of any Credit
Party or any of its Subsidiaries (an “Involuntary
Disposition”), all cash proceeds received by such Credit Party or Subsidiary in respect
thereof, and in the case of the
foregoing clauses (a), (b) and (c), net of (i) reasonable and customary
expenses incurred or reasonably expected to be incurred in connection with such
Asset Disposition, Capital Issuance or Involuntary Disposition, (ii) any
income, franchise, transfer or other tax payable by such Credit Party or such
Subsidiary in connection with such Asset Disposition, Capital Issuance or
Involuntary Disposition and (iii) any Indebtedness secured by a Lien on such
property or assets and required to be repaid as a result of such Asset
Disposition, in each case with respect to the foregoing clauses (i), (ii) and
(iii) to the extent, but only to the extent, that the amounts so deducted are,
at the time of receipt of such cash or cash equivalents, actually paid to a
Person that is not an Affiliate and are properly attributable to such
transaction or to the asset that is the subject thereof.

 

New Mortgages - as
defined in subsection 5.4 of the Agreement.

 

Nonrental Equipment
– Equipment as defined in the UCC and including, without limitation, all
equipment of any Credit Party used or useful in the conduct of its business,
but excluding any equipment which is rented by such Credit Party in the
ordinary course of business or is held for rent by such Credit Party.

 

Obligations - all
Term Loans and all other advances, debts, liabilities, obligations, covenants
and duties, together with all interest (including, without limitation, 

 

A-16

 

all interest that accrues (or, but for the
commencement of any bankruptcy, insolvency or similar proceeding, would accrue)
after the commencement of any insolvency, bankruptcy or other similar
proceeding of any Credit Party, whether or not a claim for post-filing interest
is allowed in such proceeding), fees and other charges thereon, owing, arising,
due or payable from any Credit Party to Administrative Agent, for its own benefit, from
any Credit Party to
Administrative Agent for the benefit of any Lender, from any Credit Party to any Lender or from any
Credit Party to BofA or any
other Affiliate of Administrative Agent, of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other instrument,
arising under the Agreement or any of the other Loan Documents, whether direct
or indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
and however acquired.

 

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

 

Other Agreements –
the Fee Letter and any and all other agreements, instruments and documents
(other than the Agreement, the Security Documents and any agreement evidencing
any Derivative Obligation) heretofore, now or hereafter executed or delivered
in connection with the Agreement or the transactions contemplated thereby.

 

Other Taxes – as
defined in subsection 2.11.2 of the Agreement.

 

PBGC - the Pension
Benefit Guaranty Corporation or any Governmental Authority succeeding to the
functions thereof.

 

Pension Plan - a
pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA
which any Credit Party or any
ERISA Affiliate sponsors, maintains, or to which it makes, is making, or is
obligated to make contributions.

 

Permitted Holder – each of the Persons identified on Exhibit
9.1 to the Agreement.

 

Permitted Indebtedness
– any Indebtedness of any kind specified as permitted in subsection 8.2.3
of the Agreement.

 

Permitted Liens -
any Lien of a kind specified as permitted in subsection 8.2.5 of
the Agreement.

 

Permitted Overadvances
– revolving credit loans representing First Lien Debt that are made in the form
of overadvances, protective advances or administrative agent loans (or similar
concepts) by the applicable lender or lenders in their sole discretion and the
aggregate principal amount of which at any time outstanding does not exceed
$10,000,000.

 

Permitted Purchase Money Indebtedness
- Purchase Money Indebtedness of any Credit
Party incurred after the date hereof which is secured by a Purchase
Money 

 

A-17

 

Lien and the principal amount of which, when
aggregated with the principal amount of all other such Indebtedness and
Capitalized Lease Obligations of Credit Parties and their Subsidiaries at the
time outstanding, does not exceed $15,000,000. 
For the purposes of this definition, the principal amount of any
Purchase Money Indebtedness consisting of capitalized leases (as opposed to
operating leases) shall be computed as a Capitalized Lease Obligation.

 

Person - an
individual, partnership, corporation, limited liability company, association,
joint stock company, trust, or unincorporated organization, or other enterprise
or entity or a government or agency or political subdivision thereof.

 

Plan – an employee
benefit plan (as defined in Section 3(3) of ERISA) which any Credit Party sponsors or maintains or
to which any Credit Party makes,
is making, or is obligated to make contributions and includes any Pension Plan.

 

Pledge Agreement –
the Pledge Agreement, dated as of the Closing Date, by  Credit Parties in favor of Administrative
Agent, as amended, restated, supplemented or otherwise modified from time to
time, and each other pledge or security agreement entered into from time to
time by any Credit Party in
favor of Administrative Agent, for the benefit of itself and Lenders, by which
such Credit Party has granted to
Administrative Agent, as security for the Obligations, a Lien upon the equity
or debt interests held by such Credit
Party.

 

Prime Rate - the
rate of interest announced or quoted by BofA from time to time as its prime
rate for commercial loans, whether or not such rate is the lowest rate charged
by BofA to its most preferred borrowers; and, if such prime rate for commercial
loans is discontinued by BofA as a standard, a comparable reference rate
designated by BofA as a substitute therefor shall be the Prime Rate.

 

Prior Indebtedness -
all Indebtedness and any other liabilities or obligations of any Credit Party
owing pursuant to that certain Credit Agreement dated as of February 11, 2004
by and among National Equipment Services, Inc., the financial institutions
party thereto as lenders and Wachovia Bank, National Association, as agent for
such lenders, and those agreements, documents and instruments related thereto,
as all of the same may have been amended, restated, supplemented or otherwise
modified prior to the date hereof.

 

Product Obligations
- every obligation of any Credit Party under and in respect of any one or more
of the following types of services or facilities extended to such Credit Party
by BofA, Administrative Agent, Wachovia Bank, National Association or any
Affiliate of BofA, Administrative Agent or Wachovia Bank, National
Association:  (i) credit cards or stored
value cards, (ii) cash management or related services including the automatic
clearing house transfer of funds for the account of such Credit Party pursuant
to agreement or overdraft, (iii) cash management, including controlled
disbursement services and (iv) Derivative Obligations.

 

A-18

 

Projections – Credit
Parties’ forecasted Consolidated (including
on a line of business basis) balance sheets, profit and loss statements
and cash flow statements.

 

Property - any
interest in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible.

 

Purchase Money Indebtedness
- (i) Indebtedness (other than the Obligations) for the payment of all or
any part of the purchase price of any Rental Equipment Inventory, (ii) any
Indebtedness (other than the Obligations) incurred at the time of or within 10
days prior to or after the acquisition of any fixed assets for the purpose of
financing all or any part of the purchase price thereof, and (iii) any
renewals, extensions or refinancings thereof, but not any increases in the
principal amounts thereof outstanding at the time.

 

Purchase Money Lien
- a Lien upon Rental Equipment Inventory which secures Purchase Money
Indebtedness, but only if such Lien shall at all times be confined solely to
the Rental Equipment Inventory the purchase price of which was financed through
the incurrence of the Purchase Money Indebtedness secured by such Lien.

 

Release - a release,
spill, emission, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration of a Contaminant into the indoor or outdoor environment
or into or out of any real Property or other Property, including the movement
of Contaminants through or in the air, soil, surface water, groundwater or real
Property or other Property.

 

Rental Equipment Inventory
- all of each Credit Party’s Inventory consisting of Property which is rented
by such Credit Party in the ordinary course of business or is held for rent by
such Credit Party.

 

Rentals - as defined
in subsection 8.2.17 of the Agreement.

 

Reorganization Plan
–certain of Borrower’s Subsidiaries and Affiliates’ Fourth Amended Joint Plan
of Reorganization Under Chapter 11 of the United States Bankruptcy Code dated
January 23, 2004, including, without limitation, all exhibits, supplements,
appendices, and schedules thereto.

 

Report – as defined
in subsection 11.12 of the Agreement.

 

Reportable Event -
any of the events set forth in Section 4043(c) of ERISA, other than events
for which the 30-day notice period has been waived.

 

Requirement of Law  - as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person
or any of its property or to which the Person or any of its property is
subject.

 

Reserve Percentage -
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed on member banks of 

 

A-19

 

the Federal Reserve System against “Euro-currency Liabilities” as defined in
Regulation D.

 

Responsible Officer  -
the chief executive officer or the president of Borrower, or any other officer
having substantially the same authority and responsibility; or, with respect to
compliance with financial covenants and the preparation of the Collateral
Coverage Certificate, the chief financial officer or the treasurer of Borrower,
or any other Responsible Officer having substantially the same authority and
responsibility.

 

Restricted Investment
- any investment made in cash or by delivery of Property to any Person, whether
by acquisition of stock, Indebtedness or other obligation or Security, or by
loan, advance or capital contribution, or otherwise, or in any Property except
the following:

 

(i)            investments by a
Credit Party, to the extent existing on the Closing Date, in one or more
Subsidiaries of such Credit Party;

 

(ii)           Property to be used
in the ordinary course of business;

 

(iii)          Current Assets
arising from the sale of goods and services in the ordinary course of business
of any Credit
Party or any of its Subsidiaries;

 

(iv)          investments in
direct obligations of the United States of America, or any agency thereof or
obligations guaranteed by the United States of America; provided that
such obligations mature within one year from the date of acquisition thereof;

 

(v)           investments in
certificates of deposit maturing within one year from the date of acquisition
and fully insured by the Federal Deposit Insurance Corporation;

 

(vi)          investments in
commercial paper given the highest rating by a national credit rating agency
and maturing not more than 180 days from the date of creation thereof;

 

(vii)         investments in money
market, mutual or similar funds having assets in excess of $100,000,000 and the
investments of which are limited to investment grade securities;

 

(viii)        intercompany loans
permitted under subsection 8.2.2(v) of the Agreement;

 

(ix)           investments
existing on the date hereof and listed on Exhibit 8.2.12 to the
Agreement;

 

(x)            investments
consisting of Product Obligations that are Derivative Obligations, entered into
in the ordinary course of business and not for speculative purposes; and

 

(xi)           investments
otherwise expressly permitted pursuant to subsection 8.2.2 of the
Agreement.

 

A-20

 

Schedule of Accounts
– as defined in subsection 6.2.1 of the Agreement.

 

Secured Parties –
Administrative Agent and the Lenders.

 

Security - all
shares of stock, partnership interests, membership interests, membership units
or other ownership interests in any other Person and all warrants, options or
other rights to acquire the same and, for purposes only of Sections 5
and 6 and the Security Documents, shall include any other “Security” (as
defined in the UCC).

 

Security Documents –
the Intercreditor Agreement, the Pledge Agreement, the Mortgages and all other
instruments and agreements now or at any time hereafter securing or guarantying
the whole or any part of the Obligations.

 

Serialized Rental Equipment Inventory
- Rental Equipment Inventory marked with and identifiable by serial number.

 

Solvent - as to any
Person, that such Person (i) owns Property whose fair saleable value is
greater than the amount required to pay all of such Person’s Indebtedness
(including contingent debts), (ii) is able to pay all of its Indebtedness
as such Indebtedness matures and (iii) has capital sufficient to carry on
its business and transactions and all business and transactions in which it is
about to engage.

 

Studio Business Unit
– the business of Borrower of renting lift equipment to television or motion
picture studios currently conducted by Rebel Studio Rentals, Inc.

 

Subordinated Debt -
Indebtedness of any Credit Party or
any Subsidiary of any Credit Party that
is subordinated to the Obligations in a manner satisfactory to Administrative
Agent, and contains terms, including without limitation, payment terms,
satisfactory to Administrative Agent.

 

Subsidiary - any
Person of which another Person owns, directly or indirectly through one or more
intermediaries, more than 50% of the Voting Stock at the time of determination.

 

Subsidiary Guarantor
– as defined in the preamble to the Agreement.

 

Syndication Agent –
as defined in the preamble to the Agreement.

 

Tax Liabilities – as
defined in subsection 2.11 of the Agreement.

 

Term - as defined in
subsection 4.1 of the Agreement.

 

Term Loan - the Term
Loan described in subsection 1.1.1 of the Agreement.

 

Term Loan Commitment
- with respect to any Lender, the amount of such Lender’s Term Loan Commitment
pursuant to subsection 1.1.1 of the Agreement, as set forth
opposite such Lender’s name on Exhibit 1.0 to the Agreement or any
Assignment 

 

A-21

 

and Acceptance Agreement executed by such
Lender, minus all Term Loans made by such Lender.

 

Term Notes - the
Secured Promissory Notes to be executed by Borrower on or about the Closing
Date in favor of each applicable Lender who shall request the same to evidence
its Term Loan, which shall be in the form of Exhibit 1.1 to the Agreement,
together with any replacement or successor notes therefor.

 

Total Credit Facility
- $275,000,000, as reduced from time to time pursuant to the terms of the
Agreement.

 

Total Funded Senior Leverage
Ratio – as defined in Exhibit
8.3 to the Agreement.

 

Type of Organization
- with respect to any Person, the kind or type of entity as which such Person
is organized, such as a corporation or limited liability company.

 

UCC - the Uniform
Commercial Code as in effect in the State of New York on the date of the
Agreement, as it may be amended or otherwise modified.

 

Unfunded Pension Liability
- the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16)
of ERISA, over the current value of that Pension Plan’s assets, determined in
accordance with the assumptions used for funding the Pension Plan pursuant to
Section 412 of the Code for the applicable plan year.

 

USA Patriot Act -
the Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, as in effect
from time to time

 

Voting Stock -
Securities of any class or classes of a corporation, limited partnership or
limited liability company or any other entity the holders of which are
ordinarily, in the absence of contingencies, entitled to vote with respect to
the election of corporate directors (or Persons performing similar functions).

 

Other
Terms

 

All other terms contained in the Agreement shall have, when the context
so indicates, the meanings provided by the UCC to the extent the same are used
or defined therein.

 

Certain
Matters of Construction

 

The terms “herein”, “hereof” and “hereunder” and other words of similar import refer to the
Agreement as a whole and not to any particular section, paragraph or
subdivision.  Any pronoun used shall be
deemed to cover all genders.  The section
titles, table of contents and list of exhibits appear as a matter of
convenience only and shall not affect the interpretation of the Agreement.  All references to statutes and related regulations
shall include any amendments of same and any successor statutes and 

 

A-22

 

regulations. 
All references to any of the Loan Documents shall include any and all
modifications thereto and any and all extensions or renewals thereof.

 

Accounting
Terms and Determinations

 

Unless otherwise defined or specified herein, all accounting terms
shall be construed herein and all accounting determinations for purposes of
determining compliance with subsection 8.3 of the Agreement and
otherwise to be made under the Agreement shall be made in accordance with GAAP
applied on a basis consistent in all material respects with the financial
statements delivered pursuant to subsection 8.1.3 of the Agreement (the “Financials”).  All financial statements required to be
delivered hereunder from and after the Closing Date and all financial records
shall be maintained in accordance with GAAP and to the extent required or
permitted under GAAP, shall give effect to changes from time to time required
as a result of the application of fresh start accounting.  If GAAP shall change from the basis used in
preparing the Financials (or the application of fresh start accounting shall
require such a change), the certificates required to be delivered pursuant to subsection
8.1.3 of the Agreement demonstrating compliance with the covenants
contained herein shall include calculations setting forth the adjustments
necessary to demonstrate how Borrower is in compliance with the financial
covenants based upon GAAP as in effect on the Closing Date.  If Borrower shall change its method of
inventory accounting, all calculations necessary to determine compliance with
the covenants contained herein shall be made as if such method of inventory
accounting had not been so changed.

 

Credit Parties shall deliver to Administrative Agent and each Lender at
the same time as the delivery of any annual financial statements given in
accordance with the provisions of subsection 8.1.3 of the Agreement, (i)
a description in reasonable detail of any material change in the application of
accounting principles employed in the preparation of such financial statements
from those applied in the most recently preceding annual financial statements
and (ii) a reasonable estimate of the effect on the financial statements on
account of such changes in application.

 

A-23

 

***The Registrant will deliver exhibits to
this agreement upon the request of the Securities and Exchange Commission***EXHIBIT 10.5

 

EXECUTION VERSION

 

EXCHANGE
AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

ARTICLE
I

EXCHANGE OF PRINCIPAL DEBT AND RELATED MATTERS

 

Section 1.1                                      (a)                                  Exchange of
Principal Debt for Common Stock. At the Closing, the principal balance
outstanding under the Credit Facility shall be reduced by $120,000,000, and in
consideration for such reduction, POI shall, or shall cause its duly authorized
agent (the “Exchange Agent”) to, issue and deliver to Acquisition LLC
and QMFL an aggregate of 16,000,000 shares of Common Stock (the “New Shares”)
(the “Exchange”).  The Parties
understand and agree that the New Shares to be issued to Acquisition LLC and
QMFL in the Exchange represent the equivalent of an aggregate of 800,000,000
shares of Common Stock on a pre Reverse Stock Split (as defined below) basis.

 

(b)                                 Reverse
Stock Split.  The issuance of the New
Shares in the Exchange shall occur after the filing and effectiveness of the
Charter Amendment and the 1:50 reverse stock split (the “Reverse Stock Split”)
that will be implemented pursuant to the Charter Amendment.  As a result, the Reverse Stock Split shall
not apply to the New Shares. Accordingly, based on the 98,282,679 shares of
Common Stock outstanding as of October 31, 2004, the aggregate number of New
Shares issued in the Exchange would represent approximately 89.1% of all shares
of Common Stock outstanding immediately following the Exchange, and the shares
of Common Stock outstanding immediately prior to the Exchange would represent
approximately 10.9% of all shares of Common Stock outstanding immediately
following the Exchange (excluding any impact of cash issued in lieu of
fractional shares in connection with the Reverse Stock Split).

 

(c)                                  Payment
of Interest.  At the Closing, POAMI
shall pay to Acquisition LLC and QMFL (allocated in accordance with each party’s
pro rata share of the Principal Debt) all accrued and unpaid interest on the
Principal Debt as of the Closing Date.

 

(d)                                 Payment
of Exchange Fee.  At the Closing,
POAMI shall pay Acquisition LLC, as administrative agent under the Amended and
Restated Credit Agreement, the fee referred to in Section 5.7 of the Amended
and Restated Credit Agreement (the “Exchange Fee”).

 

(e)                                  Closing
Deliveries.  At the Closing, POI
shall deliver to Acquisition LLC and QMFL or the Exchange Agent, as the case
may be, certificates representing the New Shares issued in the name of
Acquisition LLC or QMFL, as applicable, with Acquisition LLC and QMFL each
receiving certificates representing a specified percentage of the New Shares so
distributed, based on such party’s pro rata share of the Principal Debt as of
immediately prior to

 

2

 

the Closing (which amount shall be set forth in
instructions to be delivered in writing to POI by Acquisition LLC and QMFL no
later than two business days prior to the Closing).  At the Closing, POAMI, Acquisition LLC and
QMFL shall enter into an Amended and Restated Credit Agreement (the “Amended
and Restated Credit Agreement”), the form of which is set forth in Annex I
attached hereto, to be effective as of the Closing, which shall, among other
things, reflect the $120,000,000 reduction in unpaid principal balance in
connection with the Exchange, with such reduction allocated among Acquisition
LLC and QMFL in accordance with the percentages referred to in the immediately
preceding sentence.  At the Closing, the
Parties, as applicable, will deliver duly executed copies of each of the
Restructuring Documents.

 

(f)                                    Closing
Date and Location. The closing of the Exchange shall take place at the
offices of Kirkland & Ellis, 200 East Randolph Drive, Chicago, IL 60601 at
10:00 a.m., Chicago time, as soon as reasonably practicable after satisfaction
or waiver of the conditions set forth in Articles IV and V hereof, or at such
other time and place as POI and Acquisition LLC mutually agree upon orally or
in writing (which time and place are designated as the “Closing”).  The date on which the Closing may occur is
referred to herein as the “Closing Date.”

 

Section 1.2                                      (a)                                  Release
by the Quadrangle Parties.  Effective
as of the Closing, the Quadrangle Parties, for themselves and each of their
respective predecessors and successors, as well as each of their respective
trustees, privies, advisors, consultants, assigns, employees, agents,
attorneys, legal representatives, parents, subsidiaries, shareholders, members,
officers and directors solely in their capacities as such (other than POI and
its Subsidiaries or any such related individual or entity) (the “Quadrangle
Releasing Parties”), RELEASE, ACQUIT AND FOREVER DISCHARGE the Company
Parties and each of their respective Affiliates, predecessors and successors,
as well as each of their respective trustees, privies, advisors, consultants,
assigns, employees, agents, attorneys, legal representatives, shareholders,
members, officers and directors solely in their capacities as such (other than
the Quadrangle Releasing Parties) (the “Company Released Parties”) of
and from any and all claims, demands, damages, actions, causes of action,
rights, remedies, costs, losses, expenses, compensation, or suits in equity, of
whatsoever kind or nature (collectively, “Claims”), whether or not
related to any of the agreements referenced in the recitals, that any of the
Quadrangle Releasing Parties might have because of anything done, omitted,
suffered, or allowed to be done by any of the Company Released Parties on or
prior to the date of this Agreement, WHETHER HERETOFORE OR HEREAFTER ACCRUING,
WHETHER FORESEEN OR UNFORESEEN, OR WHETHER KNOWN OR UNKNOWN TO THE PARTIES,
including without limitation, any and all claims related to the Restructuring
and/or any settlement negotiations with respect thereto and also including
without limitation, any damages and the consequences thereof resulting for any
reason whatsoever (the “Company Released Matters”).  The Quadrangle Parties, for themselves and
all of the Quadrangle Releasing Parties (to the extent within the control of
the Quadrangle Parties), further agree never to commence, aid or participate in  (except to the extent required by order or
legal process issued by a court or governmental agency of competent
jurisdiction) any legal action or other proceeding based in whole or in part
upon the foregoing Company Released Matters. The Quadrangle Parties agree that
this waiver and release is an essential and material term of this Agreement and
that the agreements in this paragraph are intended to be in full satisfaction
of any alleged injuries or damages in connection with the Company Released
Matters.  The Quadrangle Parties also
understand that this release shall apply to all unknown or unanticipated
results of any action of any party, as well as those known and anticipated.  The

 

3

 

Quadrangle Parties have consulted with legal counsel
prior to signing this Agreement, and execute this Agreement voluntarily, with
the intention of fully and finally extinguishing all Company Released
Matters.  The Parties acknowledge and
agree that, notwithstanding anything to the contrary contained herein, the
rights and obligations set forth in this Agreement and the other Restructuring
Documents and the management and information rights letter dated February 17,
2004 from POI to Quadrangle Capital Partners LP (the “VCOC Letter”)
shall survive and shall not be waived or released by this Agreement other than
with respect to any Claims arising from anything done, omitted, suffered, or
allowed to be done under the Credit Facility on or prior to the date of this
Agreement.

 

(b)                                 Release
by the Company Parties.  Effective as
of the Closing, the Company Parties for themselves and each of CMS and Network
(in their capacities as guarantors under the Credit Facility and subsidiaries
of the Company Parties) and each of their respective predecessors and
successors, as well as each of their respective trustees, privies, advisors,
consultants, assigns, employees, agents, attorneys, legal representatives,
parents, subsidiaries, shareholders, members, officers and directors solely in
their capacities as such (other than the Quadrangle Releasing Parties) (the “Company
Releasing Parties”), RELEASE, ACQUIT AND FOREVER DISCHARGE the Quadrangle
Parties and each of their respective Affiliates, predecessors and successors,
as well as each of their respective trustees, privies, advisors, consultants,
assigns, employees, agents, attorneys, legal representatives, shareholders,
members, officers and directors solely in their capacities as such (other than
the Company Releasing Parties) (the “Quadrangle Released Parties”) of
and from any and all Claims, whether or not related to any of the agreements
referenced in the recitals, that any of the Company Releasing Parties might
have because of anything done, omitted, suffered, or allowed to be done by any
of the Quadrangle Released Parties on or prior to the date of this Agreement,
WHETHER HERETOFORE OR HEREAFTER ACCRUING, WHETHER FORESEEN OR UNFORESEEN, OR
WHETHER KNOWN OR UNKNOWN TO THE PARTIES, including without limitation, any and
all claims related to the Restructuring and/or any settlement negotiations with
respect thereto and also including without limitation, any damages and the
consequences thereof resulting for any reason whatsoever (the “Quadrangle
Released Matters”).  The Company
Parties, for themselves and all of the Company Releasing Parties (to the extent
within the control of the Company Parties), further agree never to commence,
aid or participate in (except to the extent required by order or legal process
issued by a court or governmental agency of competent jurisdiction) any legal
action or other proceeding based in whole or in part upon the foregoing
Quadrangle Released Matters.  The Company
Parties agree that this waiver and release is an essential and material term of
this Agreement and that the agreements in this paragraph are intended to be in
full satisfaction of any alleged injuries or damages in connection with the
Quadrangle Released Matters.  The Company
Parties also understand that this release shall apply to all unknown or
unanticipated results of any action of any party, as well as those known and
anticipated.  The Company Parties have
consulted with legal counsel prior to signing this Agreement, and execute this
Agreement voluntarily, with the intention of fully and finally extinguishing
all Quadrangle Released Matters.  The
Parties acknowledge and agree that, notwithstanding anything to the contrary
contained herein, the rights and obligations set forth in this Agreement, the
other Restructuring Documents and the VCOC Letter shall survive and shall not
be waived or released by this Agreement other than with respect to any Claims
arising from anything done, omitted, suffered, or allowed to be done under the
Credit Facility on or prior to the date of this Agreement.

 

4

 

(c)                                  Credit
Facility Waivers; Forbearance. 
Without in any way limiting Section 1.2(a), effective as of the Closing,
Acquisition LLC and QMFL hereby waive and release all defaults and events of
default under the Credit Facility existing immediately prior to the
Closing.  Without in any way limiting
Section 1.2(b), effective as of the Closing, the Company Releasing Parties
hereby waive, release, acquit and forever discharge the Quadrangle Released
Parties from any Claims relating to the Credit Facility, whether arising from
anything done, omitted, suffered, or allowed to be done on or prior to the date
of this Agreement, including without limitation any Claims relating to lender
liability, the doctrine of recharacterization or equitable subordination, and
shall not seek to exercise any defenses, rights of set-off or recoupment with
respect to the Obligation, or any portion thereof, in connection with any such
Claims.

 

Section 1.3                                      Exceptions
to Release.  Notwithstanding anything
to the contrary contained herein, the provisions of this Article I shall
have no effect on any alarm monitoring or other service agreements (including
card access control, CCTV and fire and security monitoring services), if any,
among the Quadrangle Released Parties, on the one hand, and the Company
Released Parties, on the other hand, in effect on the date of this Agreement; provided,
however, that nothing in this Article I shall be held or implied to waive,
affect or otherwise modify any rights, claims or defenses that any Quadrangle
Released Party or Company Released Party has or may have with respect to the
agreements described in this Section 1.3.

 

ARTICLE
II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES

 

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

 

Section 2.1                                      Organization
and Standing of the Company Parties. The Company Parties, Network and
Security Monitoring Services, Inc., a Florida corporation (“CMS”), are
corporations duly organized, validly existing and in good standing under the
laws of their state of incorporation and have all requisite corporate power and
authority (a) to own, lease and operate their material properties and to carry
on their business as now being conducted and (b) to execute, deliver and
perform their obligations under, as applicable, this Agreement and the other
Restructuring Documents and to consummate the transactions contemplated hereby
and thereby.  The Company Parties and
their Subsidiaries are duly qualified to do business and are in good standing
in all jurisdictions wherein such qualification is necessary and where failure
to so qualify would have a Material Adverse Effect.

 

Section 2.2                                      Authorization
of Transaction Documents.  The
execution and delivery by the Company Parties of this Agreement and, as
applicable, the other Restructuring Documents have been, and the execution and
delivery by Network and CMS of the other Restructuring Documents to which they
will be parties will be, duly and validly authorized by, as applicable, the
Company Parties (including approval by the disinterested directors of the
Company Parties), Network and CMS.  This
Agreement has been duly executed and delivered by the Company Parties, and this
Agreement is, and each of the other Restructuring Documents, when executed and
delivered by the Company Parties, Network and CMS, as applicable, will be,
assuming each

 

5

 

is a valid and binding agreement of the applicable
Quadrangle Parties, a valid and binding obligation of such Company Parties,
Network and CMS, as applicable, enforceable in accordance with their respective
terms, subject as to enforceability to general principles of equity and to
bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors’ rights generally.

 

Section 2.3                                      No
Conflicts.  The execution, delivery
and performance by the Company Parties of this Agreement, and the execution,
delivery and performance by the Company Parties, Network and CMS, as
applicable, of the other Restructuring Documents and the consummation by the
Company Parties, Network and CMS, as applicable, of the transactions
contemplated hereunder and thereunder (including the Reverse Stock Split) will
not (subject to the filing and effectiveness of the Charter Amendment) (a)
conflict with or result in any breach of any provision of their certificates of
incorporation or by-laws, (b) subject to compliance with any required filings,
mailings to stockholders, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of, federal securities
laws and applicable state securities or blue sky laws, conflict with or result
in the breach of the terms, conditions or provisions of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give rise to any right of termination, acceleration or cancellation
under, any agreement, lease, mortgage, license, indenture, instrument or other
contract to which a Company Party, Network, or CMS is a party or by which any
of their properties or assets are bound (including under any equity incentive
plans and any options, warrants, convertible securities or other rights to
acquire shares of Common Stock), or (c) subject to compliance with any required
filings, mailings to stockholders, permits, authorizations, consents and
approvals as may be required under, and other applicable requirements of,
federal securities laws, applicable state securities or blue sky laws, result
in a violation of any law, rule, regulation, order, judgment or decree
(including, without limitation, federal and state securities laws and
regulations) applicable to a Company Party, Network or CMS or by which any of
their properties or assets are bound or affected, except in the case of clauses
(b) or (c), where such conflicts or violations would not have a Material
Adverse Effect or prevent or materially delay their ability to consummate the
transactions contemplated by this Agreement.

 

Section 2.4                                      Capitalization.  As of the date of this Agreement, the
authorized capital stock of POI is (a) 150,000,000 shares of Common Stock and
(b) 5,000,000 shares of preferred stock, par value $0.10 per share (the “Preferred
Stock”).  All of the outstanding
capital stock of POI has been duly authorized and validly issued and are fully
paid and non-assessable and have no preemptive rights.  As of the date of this Agreement, there are:
(a) 98,282,679 shares of Common Stock outstanding and (b) no shares of
Preferred Stock outstanding.  As of the
date of this Agreement, POI has outstanding options, warrants and similar
rights entitling the holders to purchase or acquire 4,283,898 shares of Common
Stock, and 3,307,305 shares of Common Stock reserved for future grants under
equity incentive plans of POI or any of its Subsidiaries and 1,030,837 shares
of Common Stock reserved for issuance pursuant to outstanding warrants.  Other than as set forth in the preceding
sentence, there are not outstanding any (i) shares of capital stock or voting
securities (or obligation to issue or repurchase any such securities) or (ii)
securities of POI or a Subsidiary convertible into, exchangeable for or
otherwise entitling the holders thereof to acquire shares of capital stock or
voting securities of POI.  POI has duly
reserved from its authorized and unissued shares of Common Stock the full
number of shares required for (a) all options, warrants, convertible securities
and other rights to acquire shares of Common Stock which are outstanding and
(b) all shares of Common Stock and options and other rights to acquire shares
of

 

6

 

Common Stock which may be issued or granted under the
stock option and similar plans which have been adopted by POI or any of its
Subsidiaries.  The New Shares, when
issued and delivered in accordance with the terms hereof, will be duly
authorized and validly issued, fully paid and non-assessable.

 

Section 2.5                                      SEC
Filings.  POI has filed in a timely
manner all documents that POI was required to file under the Exchange Act since
December 31, 2003 (the “SEC Filings”). 
The SEC Filings complied in all material respects with the requirements
of the Exchange Act as of their respective filing dates. No SEC Filings
contained any untrue statement of material fact or omitted to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.

 

Section 2.6                                      No
Material Liabilities.  As of
September 30, 2004, none of the Company Parties, Network or CMS has any
liabilities of any kind (whether accrued, absolute, contingent or otherwise,
and whether due or to become due) that would be required to be reflected on a
balance sheet prepared in accordance with United States generally accepted
accounting principles consistently applied in order for such balance sheet to
present fairly in all material respects the consolidated financial position of
POI and its Subsidiaries except for liabilities set forth on the financial
statements contained in the draft POI Form 10-Q for the fiscal quarter ended September
30, 2004 provided to the Quadrangle Parties on November 10, 2004 (the “Draft
10-Q”) or otherwise reflected in, reserved against or otherwise described
in the Draft 10-Q.

 

Section 2.7                                      Absence
of Certain Changes.  Except as
disclosed in the SEC Filings or the Draft 10-Q, since September 30, 2004, the
business of POI and its Subsidiaries, taken as a whole, has been conducted in
the ordinary course consistent with past practice and there has not been a
Material Adverse Change.

 

Section 2.8                                      Compliance
with Laws and Court Orders.  None of
POI or any of its Subsidiaries is in violation of any applicable law, rule,
regulation, judgment, injunction, order or decree, except for violations that
have not had and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.

 

Section 2.9                                      Standstill
Agreement; Equity Standstill Agreement. 
There has not occurred a “Termination Event” under the Standstill
Agreement or an “Equity Standstill Termination Event” under the Equity Standstill
Agreement, provided, that a Termination Event or an Equity Standstill
Termination Event shall not be deemed to have occurred under the Standstill
Agreement or Equity Standstill Agreement, respectively, due to any action
performed or contemplated to be performed under this Agreement.

 

Section 2.10                                Credit
Facility.  The Credit Facility is a
valid and binding agreement of POAMI and POI and Network (as guarantors
thereunder) and is in full force with respect to such parties and, as of the
date of this Agreement (but prior to giving effect to the payment contemplated
by Section 6.14), the total Obligations under the Credit Facility are
$215,500,000 of Principal Debt plus all accrued and unpaid interest
thereon.  No Default (as defined in the
Credit Facility) has occurred that is continuing other than any Specified
Defaults (as defined in the Standstill Agreement).

 

7

 

Section 2.11                                Opinion
of Financial Advisor.  The Board of
Directors of POI has received an opinion of Houlihan Lokey Howard & Zukin
(the “Fairness Opinion”) to the effect that the Exchange is fair, from a
financial point of view, to POI and to the holders of Common Stock other than
Acquisition Inc.

 

ARTICLE
III

REPRESENTATIONS AND WARRANTIES OF THE QUADRANGLE PARTIES

 

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

 

Section 3.1                                      Organization
and Standing of the Quadrangle Parties. The Quadrangle Parties are duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation or formation and have all requisite
power and authority (a) to own, lease and operate their material properties and
to carry on their business as now being conducted and (b) to execute, deliver and
perform their obligations under this Agreement and, as applicable, the other
Restructuring Documents and to consummate the transactions contemplated hereby
and thereby.

 

Section 3.2                                      Authorization
of Transaction Documents.  The
execution and delivery by the Quadrangle Parties of this Agreement and, as
applicable, the other Restructuring Documents have been duly and validly
authorized by the Quadrangle Parties. This Agreement has been duly executed and
delivered by the Quadrangle Parties, the Stockholder Consent has been duly
executed and delivered by Acquisition Inc., and each of this Agreement and the
Stockholder Consent is, and each of the other Restructuring Documents, when
executed and delivered by the applicable Quadrangle Parties, will be, assuming each
is a valid and binding agreement of the applicable Company Parties, a valid and
binding obligation or consent, as applicable, of such Quadrangle Parties
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors’
rights generally.

 

Section 3.3                                      No
Conflicts.  The execution, delivery
and performance by the Quadrangle Parties of this Agreement and, as applicable,
the other Restructuring Documents and the consummation by the Quadrangle
Parties of the transactions contemplated hereunder and thereunder will not (a)
conflict with or result in any breach of any provision of their certificates of
incorporation or by-laws or similar organizational documents, as applicable,
(b) subject to compliance with any required filings, mailings to stockholders,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, federal securities laws and applicable state
securities or blue sky laws, conflict with or result in the breach of the
terms, conditions or provisions of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
rise to any right of termination, acceleration or cancellation under, any
agreement, lease, mortgage, license, indenture, instrument or other contract to
which a Quadrangle Party is a party or by which any of their properties or assets
are bound, or  (c) subject to compliance
with any required filings, mailings to stockholders, permits, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, federal securities laws, applicable state securities or blue
sky laws, result in a violation of any law, rule, regulation, order, judgment
or decree (including, without limitation, federal and state securities laws and
regulations) applicable to a Quadrangle

 

8

 

Party or by which any of their properties or assets
are bound or affected, except in the case of clauses (b) or (c), where such
conflicts or violations would not have a material adverse effect on their
ability to consummate the transactions contemplated by this Agreement.

 

Section 3.4                                      Credit
Facility.  The Credit Facility is a
valid and binding agreement of Acquisition LLC and QMFL and is in full force
with respect to such parties and neither Acquisition LLC nor QMFL is in default
or breach in any material respect under the terms of the Credit Facility
(except any default or breach caused by the consummation of the transactions
contemplated hereby).  Acquisition LLC
and QMFL are the only lenders under the Credit Facility, and as of the date of
this Agreement, each holds the amount of Principal Debt set forth under its
name on the signature pages hereto. 
There are no outstanding agreements, arrangements or understandings
under which Acquisition LLC or QMFL may be obligated to transfer any Committed
Sums, Principal Debt or other Obligations. 
As of or prior to the date of this Agreement, neither Acquisition LLC
nor QMFL has sold, assigned or transferred any Claims with respect to the
Credit Facility, except that in February of 2004 Acquisition LLC assigned to
QMFL, and QMFL assumed from Acquisition LLC, one-third of the Total Committed
Sums (as defined in the Credit Facility) and Principal Debt (as defined in the
Credit Facility), together with one-third of the other Obligations (as defined
in the Credit Facility).

 

Section 3.5                                      Ownership
of Common Stock.  Acquisition Inc.
owns (and will continuously own through the time of the Closing) of record and
beneficially 85,291,497 shares of Common Stock (subject to adjustment as a
result of the Reverse Stock Split) (and Acquisition Inc. has not sold, assigned
or transferred any Claims with respect to such shares of Common Stock, and
through the time of the Closing will not sell, assign or transfer any Claims
with respect to such shares of Common Stock); provided, that Acquisition Inc.
shall be entitled to transfer any such shares of Common Stock to an Affiliate,
to the extent such Affiliate agrees in writing, reasonably acceptable to POI,
to be bound by all of the provisions applicable hereunder or under the Equity Standstill
Agreement to Acquisition Inc.

 

Section 3.6                                      Liens.
The Credit Facility is not subject to any Lien. 
The execution and delivery of, and the performance by the Quadrangle
Parties of their obligations under, this Agreement will not result in the creation
of any Lien upon the Credit Facility.

 

Section 3.7                                      Investment
Representations.  The Quadrangle
Parties understand that the New Shares to be issued to Acquisition LLC and QMFL
pursuant to this Agreement will not be registered under the Securities Act based
on an exemption from registration provided by Section 4(2) of the Securities
Act and Regulation D thereof and similar provisions under applicable state
securities laws.  As of the date of this
Agreement and at all times prior to and including the Closing, the Quadrangle
Parties are and will be “accredited investors” as such term is defined in Rule
501(a) of Regulation D promulgated under the Securities Act.  The Quadrangle Parties have reviewed copies
of the SEC Filings to the extent they deem necessary to make an investment
decision or a decision to enter into this Agreement, and in connection with the
Quadrangle Parties’ decisions to accept the New Shares in connection with the
Exchange or to enter into and consummate the transaction contemplated by this
Agreement, the Quadrangle Parties have relied solely on the SEC Filings and the
representations and warranties contained herein.  Acquisition LLC and QMFL are acquiring the
New Shares solely for investment with no present intention to distribute any of
the New Shares to any Person and will not sell or otherwise dispose of any of

 

9

 

the New Shares except in compliance with the
registration requirements or exemption provisions of the Securities Act and any
other applicable securities laws.

 

ARTICLE
IV

CONDITIONS PRECEDENT TO THE QUADRANGLE PARTIES’ OBLIGATIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

ARTICLE
V

CONDITIONS PRECEDENT TO THE COMPANY PARTIES’ OBLIGATIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

ARTICLE
VI

CERTAIN COVENANTS AND AGREEMENTS OF THE PARTIES

 

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

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

(a)  adopt or propose any change in its
certificate of incorporation or by-laws;

 

(b)  merge or consolidate with any other
Person or acquire a material amount of assets of any Person;

 

(c)  sell, lease, license or otherwise
dispose of any material assets or property except pursuant to existing
contracts or commitments or otherwise in the ordinary course;

 

(d)  declare, set aside or pay any dividend
or other distribution with respect to any shares of Common Stock, or
repurchase, redeem or otherwise acquire any outstanding shares of Common Stock
or other securities of POI or its Subsidiaries (including the Senior Sub
Discount Notes and POAMI’s Senior Notes or Subordinated Notes (each term as
defined in the Amended and Restated Credit Agreement));

 

(e)  incur, assume, refinance or guarantee
any material indebtedness for borrowed money;

 

13

 

(f)  issue, sell, transfer, encumber or
otherwise dispose of shares of its capital stock (other than shares of its Common
Stock issued and sold in accordance with the terms of options, warrants or
other stock purchase rights outstanding on the date hereof or issued under
employee benefit plans in effect as of the date hereof or pursuant to any of
the transactions comprising the Restructuring), options, warrants,
subscriptions, rights or other securities convertible into or exercisable or
exchangeable for capital stock;

 

(g) (i) grant any increase in compensation,
benefits or any severance or termination pay to any present or former director,
officer, employee or independent contractor (for the avoidance of doubt, this
shall not prohibit the payment of increased compensation, benefits or any
severance or termination pay (A) pursuant to any arrangement existing on the
date of this Agreement or (B) in the ordinary course of business to any
employee or independent contractor that is not a present or former director or
officer); (ii) adopt any new severance, retention or change in control
arrangement, except as required by applicable law or pursuant to written
agreements in effect or policies existing on the date of this Agreement; (iii)
loan or advance any money or other property to any present or former director,
officer, employee or independent contractor of POI or any Subsidiary of POI,
other than travel advances or similar advances made in the ordinary course
consistent with past practice; (iv) (A) establish, adopt, enter into, amend or
terminate any employee benefit plan or (B) grant any equity or equity-based
awards or allow for the commencement of any new offering periods under POI’s
employee stock purchase plans;

 

(h)  establish, adopt, enter into, amend or
terminate any, collective bargaining 
agreement (other than as may be required under the terms of an existing
collective bargaining agreement, or as may be required by applicable law);

 

(i)  settle or compromise any suit, claim,
proceeding or dispute or threatened suit, claim, proceeding or dispute if such
settlement or compromise would result in (i) any injunctive or similar relief,
(ii) an obligation to make a payment in excess of $100,000, except to the
extent such payments are to be made with insurance proceeds (net of any
insurance policy indemnity or retrospective premium adjustment), or (iii) any
restructuring of any of its indebtedness;

 

(j)  enter into any negotiations with
holders of the Senior Sub Discount Notes or POAMI’s Senior Notes or
Subordinated Notes (each term as defined in the Amended and Restated Credit
Agreement) with respect to any payment in respect of any principal amount under
any such indebtedness, any restructuring of such indebtedness or the amendment
of any indenture governing any such indebtedness;

 

(k)  make or change any material tax
election, file any material amended tax returns or settle any material tax
claim, audit or assessment if such election, change, filing or settlement would
result in an obligation to make payments, in the aggregate, in excess of the
amount reserved by POI for such payments as of September 30, 2004;

 

(l)  make any change in any method of
accounting or accounting practice by POI or any Subsidiary of POI, except as
required by law or to comply with United States generally accepted accounting
principles;

 

14

 

(m)  make any material capital expenditures
or commitments that aggregate in excess of $100,000, excluding capital
expenditures made in accordance with the projections previously provided to
Acquisition LLC and QMFL;

 

(n)  hire, retain or otherwise engage any
outside consultant or financial advisor; or

 

(o)  agree or commit to do any of the
foregoing.

 

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

 

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

 

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

 

“The securities
represented by this certificate have not been registered under the Securities
Act of 1933, as amended (the “Act”), or applicable state securities laws and
may not be sold or transferred in the absence of an effective registration
statement for such securities under the Act and applicable state securities
laws, or the availability of an exemption from registration thereunder.

 

The securities represented by this
certificate are also subject to additional 
restrictions on transfer and certain other agreements set forth in a
Registration Rights Agreement, dated as of                       ,
among the issuer of such securities (the “Company”) and certain of the Company’s
security holders, as amended from time to time, and a Stockholders Agreement,
dated as of                       ,
among the Company and certain of the Company’s security holders, as amended
from time to time.  A copy of such
Registration Rights Agreement and Stockholders Agreement may be obtained by the
holder hereof at the Company’s principal place of business without charge.”

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

ARTICLE
VII

TERMINATION

 

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

 

16

 

ARTICLE
VIII

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

“Company
Parties” means POI and POAMI.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“SEC” means
the Securities and Exchange Commission.

 

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

 

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

 

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

 

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

 

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

 

18

 

ARTICLE
IX

MISCELLANEOUS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

19

 

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

 

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

 

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

 

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

 

*                                         *                                         *                                         *

 

20

 

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

 

	
   

  	
  PROTECTION ONE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard Ginsburg

  	
   

  
	
   

  	
  Name:

  	
  Richard
  Ginsburg

  	
   

  
	
   

  	
  Title:

  	
  President and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
  PROTECTION ONE ALARM MONITORING,
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard Ginsburg

  	
   

  
	
   

  	
  Name:

  	
  Richard
  Ginsburg

  	
   

  
	
   

  	
  Title:

  	
  President and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
  POI ACQUISITION I, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David A. Tanner

  	
   

  
	
   

  	
  Name:

  	
  David
  A. Tanner

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
  POI ACQUISITION, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David A. Tanner

  	
   

  
	
   

  	
  Name:

  	
  David
  A. Tanner

  	
   

  
	
   

  	
  Title:

  	
  Member

  	
   

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  QUADRANGLE MASTER FUNDING LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael Weinstock

  	
   

  
	
   

  	
  Name:

  	
  Michael
  Weinstock

  	
   

  
	
   

  	
  Title:

  	
  Member

  	
   

  
	
   

  	
   

  
	
   

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

  
						

 

ANNEX I

 

 

AMENDED AND
RESTATED CREDIT AGREEMENT

 

 

among

 

 

PROTECTION ONE
ALARM MONITORING, INC.

Borrower

 

 

POI
ACQUISITION, L.L.C.,

Administrative Agent

 

 

and

 

 

THE LENDERS
NAMED HEREIN,

Lenders

 

 

$[•]

 

 

Dated as of [•], 2005

 

 

TABLE OF CONTENTS

 

 

	
  SECTION 1

  	
  DEFINITIONS AND TERMS

  	
   

  
	
  1.1

  	
  Definitions

  	
   

  
	
  1.2

  	
  Number and Gender of Words; Other References

  	
   

  
	
  1.3

  	
  Accounting
  Principles

  	
   

  
	
  SECTION 2

  	
  BORROWING PROVISIONS

  	
   

  
	
  2.1

  	
  Commitments

  	
   

  
	
  2.2

  	
  [Intentionally
  Omitted]

  	
   

  
	
  2.3

  	
  Termination
  of Commitments

  	
   

  
	
  2.4

  	
  Borrowing
  Procedure

  	
   

  
	
  2.5

  	
  [Intentionally Omitted]

  	
   

  
	
  SECTION
  3

  	
  TERMS
  OF PAYMENT

  	
   

  
	
  3.1

  	
  Loan Accounts and Payments

  	
   

  
	
  3.2

  	
  Interest and Principal Payments

  	
   

  
	
  3.3

  	
  Interest
  Options

  	
   

  
	
  3.4

  	
  Quotation
  of Rates

  	
   

  
	
  3.5

  	
  Default
  Rate

  	
   

  
	
  3.6

  	
  Interest
  Recapture

  	
   

  
	
  3.7

  	
  Interest
  Calculations

  	
   

  
	
  3.8

  	
  Maximum
  Rate

  	
   

  
	
  3.9

  	
  Interest
  Periods

  	
   

  
	
  3.10

  	
  Conversions

  	
   

  
	
  3.11

  	
  Order of Application

  	
   

  
	
  3.12

  	
  Sharing of Payments, Etc

  	
   

  
	
  3.13

  	
  Offset

  	
   

  
	
  3.14

  	
  Booking
  Borrowings

  	
   

  
	
  3.15

  	
  Replacement of Lenders under Certain Circumstances

  	
   

  
	
  3.16

  	
  Extension of Termination Date

  	
   

  
	
  SECTION
  4

  	
  CHANGE
  IN CIRCUMSTANCES

  	
   

  
	
  4.1

  	
  Increased Cost and Reduced Return

  	
   

  
	
  4.2

  	
  Limitation on Types of Borrowings

  	
   

  
	
  4.3

  	
  Illegality

  	
   

  
	
  4.4

  	
  Treatment of Affected Loans

  	
   

  
	
  4.5

  	
  Compensation

  	
   

  
	
  4.6

  	
  Taxes

  	
   

  
	
  SECTION
  5

  	
  FEES

  	
   

  

 

i

 

	
  5.1

  	
  Treatment
  of Fees

  	
   

  
	
  5.2

  	
  [Intentionally
  Omitted]

  	
   

  
	
  5.3

  	
  [Intentionally
  Omitted]

  	
   

  
	
  5.4

  	
  [Intentionally
  Omitted]

  	
   

  
	
  5.5

  	
  [Intentionally
  Omitted]

  	
   

  
	
  5.6

  	
  Exchange
  Fee

  	
   

  
	
  5.7

  	
  Termination
  Date

  	
   

  
	
  SECTION
  6

  	
  GUARANTIES

  	
   

  
	
  6.1

  	
  POI
  Guaranty

  	
   

  
	
  6.2

  	
  Subsidiary
  Guaranty

  	
   

  
	
  6.3

  	
  Other
  Guaranties

  	
   

  
	
  SECTION
  7

  	
  CONDITIONS
  PRECEDENT

  	
   

  
	
  7.1

  	
  [Intentionally
  Omitted]

  	
   

  
	
  7.2

  	
  Conditions to all Borrowings

  	
   

  
	
  SECTION
  8

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
  8.1

  	
  Purpose
  of Credit Facility

  	
   

  
	
  8.2

  	
  Existence,
  Good Standing, Authority, and Authorizations

  	
   

  
	
  8.3

  	
  Subsidiaries;
  Capital Stock

  	
   

  
	
  8.4

  	
  Authorization
  and Contravention

  	
   

  
	
  8.5

  	
  Binding
  Effect

  	
   

  
	
  8.6

  	
  Financial
  Statements

  	
   

  
	
  8.7

  	
  Litigation,
  Claims, Investigations

  	
   

  
	
  8.8

  	
  Taxes

  	
   

  
	
  8.9

  	
  Environmental
  Matters

  	
   

  
	
  8.10

  	
  Employee
  Benefit Plans

  	
   

  
	
  8.11

  	
  Properties;
  Liens

  	
   

  
	
  8.12

  	
  Government
  Regulations

  	
   

  
	
  8.13

  	
  Material
  Agreements

  	
   

  
	
  8.14

  	
  Labor
  Matters

  	
   

  
	
  8.15

  	
  Solvency

  	
   

  
	
  8.16

  	
  Intellectual
  Property

  	
   

  
	
  8.17

  	
  Compliance
  with Laws

  	
   

  
	
  8.18

  	
  Full
  Disclosure

  	
   

  
	
  8.19

  	
  [Intentionally
  Omitted]

  	
   

  
	
  8.20

  	
  Senior
  Debt

  	
   

  
	
  SECTION
  9

  	
  AFFIRMATIVE
  COVENANTS

  	
   

  
	
  9.1

  	
  Use
  of Proceeds

  	
   

  
	
  9.2

  	
  Books
  and Records

  	
   

  

 

ii

 

	
  9.3

  	
  Items
  to be Furnished

  	
   

  
	
  9.4

  	
  Inspections

  	
   

  
	
  9.5

  	
  Taxes

  	
   

  
	
  9.6

  	
  Maintenance
  of Existence, Assets, and Business

  	
   

  
	
  9.7

  	
  Insurance

  	
   

  
	
  9.8

  	
  Preservation and Protection of Rights

  	
   

  
	
  9.9

  	
  Environmental
  Laws

  	
   

  
	
  9.10

  	
  [Intentionally
  Omitted]

  	
   

  
	
  9.11

  	
  Compliance
  with Laws

  	
   

  
	
  9.12

  	
  After-Acquired Subsidiaries

  	
   

  
	
  9.13

  	
  Other
  Required Guarantors

  	
   

  
	
  SECTION
  10

  	
  NEGATIVE
  COVENANTS

  	
   

  
	
  10.1

  	
  Employee
  Benefit Plans

  	
   

  
	
  10.2

  	
  Debt of Foreign Subsidiaries

  	
   

  
	
  10.3

  	
  Liens

  	
   

  
	
  10.4

  	
  Transactions with Affiliates

  	
   

  
	
  10.5

  	
  Compliance with Documents

  	
   

  
	
  10.6

  	
  Fiscal Year and Accounting Methods

  	
   

  
	
  10.7

  	
  New
  Business

  	
   

  
	
  10.8

  	
  Loans,
  Advances, and Investments

  	
   

  
	
  10.9

  	
  Distributions and Subordinated Debt
  Payments

  	
   

  
	
  10.10

  	
  Restrictions on Companies

  	
   

  
	
  10.11

  	
  Sale
  of Assets

  	
   

  
	
  10.12

  	
  Mergers and Dissolutions; Sale of Capital
  Stock

  	
   

  
	
  10.13

  	
  Financial Covenants

  	
   

  
	
  SECTION
  11

  	
  DEFAULT

  	
   

  
	
  11.1

  	
  Payment of Obligation

  	
   

  
	
  11.2

  	
  Covenants

  	
   

  
	
  11.3

  	
  Debtor
  Relief

  	
   

  
	
  11.4

  	
  Judgments and Attachments

  	
   

  
	
  11.5

  	
  Misrepresentation

  	
   

  
	
  11.6

  	
  Change
  of Control

  	
   

  
	
  11.7

  	
  Default Under Other Debt and Agreements

  	
   

  
	
  11.8

  	
  Employee Benefit Plans

  	
   

  
	
  11.9

  	
  Validity and Enforceability of Loan
  Documents

  	
   

  
	
  11.10

  	
  Environmental Liability

  	
   

  
	
  SECTION 12

  	
  RIGHTS AND REMEDIES

  	
   

  
	
  12.1

  	
  Remedies Upon Default

  	
   

  

 

iii

 

	
  12.2

  	
  Company
  Waivers

  	
   

  
	
  12.3

  	
  Performance by Administrative Agent

  	
   

  
	
  12.4

  	
  Delegation of Duties and Rights

  	
   

  
	
  12.5

  	
  Not
  in Control

  	
   

  
	
  12.6

  	
  Course
  of Dealing

  	
   

  
	
  12.7

  	
  Cumulative
  Rights

  	
   

  
	
  12.8

  	
  Application of Proceeds

  	
   

  
	
  12.9

  	
  Certain Proceedings

  	
   

  
	
  12.10

  	
  Expenditures by Lenders

  	
   

  
	
  12.11

  	
  Indemnification

  	
   

  
	
  SECTION 13

  	
  AGREEMENT AMONG LENDERS

  	
   

  
	
  13.1

  	
  Administrative Agent

  	
   

  
	
  13.2

  	
  Expenses

  	
   

  
	
  13.3

  	
  Proportionate Absorption of Losses

  	
   

  
	
  13.4

  	
  Delegation of Duties; Reliance

  	
   

  
	
  13.5

  	
  Limitation
  of Liability

  	
   

  
	
  13.6

  	
  Default

  	
   

  
	
  13.7

  	
  Limitation
  of Liability

  	
   

  
	
  13.8

  	
  Relationship of Lenders

  	
   

  
	
  13.9

  	
  Benefits of Agreement

  	
   

  
	
  13.10

  	
  [Intentionally Omitted]

  	
   

  
	
  13.11

  	
  Obligations Several

  	
   

  
	
  SECTION
  14

  	
  MISCELLANEOUS

  	
   

  
	
  14.1

  	
  Headings

  	
   

  
	
  14.2

  	
  Nonbusiness
  Days

  	
   

  
	
  14.3

  	
  Communications

  	
   

  
	
  14.4

  	
  Form and Number of Documents

  	
   

  
	
  14.5

  	
  Confidentiality

  	
   

  
	
  14.6

  	
  Survival

  	
   

  
	
  14.7

  	
  Governing
  Law

  	
   

  
	
  14.8

  	
  Invalid Provisions

  	
   

  
	
  14.9

  	
  Entirety

  	
   

  
	
  14.10

  	
  Jurisdiction;
  Venue; Service of Process; Jury Trial

  	
   

  
	
  14.11

  	
  Amendments,
  Consents, Conflicts, and Waivers

  	
   

  
	
  14.12

  	
  Multiple Counterparts

  	
   

  
	
  14.13

  	
  Successors and Assigns; Assignments and
  Participations

  	
   

  
	
  14.14

  	
  Discharge
  Only Upon Payment in Full; Reinstatement in Certain Circumstances

  	
   

  
	
  14.15

  	
  Designated Senior Indebtedness

  	
   

  

 

iv

 

SCHEDULES AND
EXHIBITS

 

	
  Schedule
  2.1

  	
  -

  	
   

  	
  Lenders
  and Commitments; Addresses for Notice

  
	
  Schedule
  8.2

  	
  -

  	
   

  	
  Companies

  
	
  Schedule
  8.3

  	
  -

  	
   

  	
  Subsidiaries
  and Stock

  
	
  Schedule
  10.3

  	
  -

  	
   

  	
  Existing
  Capital Leases

  
	
  Schedule 10.4

  	
  -

  	
   

  	
  Affiliate Transactions

  
	
  Schedule
  10.8

  	
  -

  	
   

  	
  Existing
  Investments

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit
  A-1

  	
  -

  	
   

  	
  Form
  of Compliance Certificate

  
	
  Exhibit B

  	
  -

  	
   

  	
  Form of Note

  
	
  Exhibit
  C-1

  	
  -

  	
   

  	
  Form
  of Notice of Borrowing

  
	
  Exhibit
  C-2

  	
  -

  	
   

  	
  Form
  of Notice of Conversion

  
	
  Exhibit
  D-1

  	
  -

  	
   

  	
  Form
  of POI Guaranty

  
	
  Exhibit
  D-2

  	
  -

  	
   

  	
  Form
  of Subsidiary Guaranty

  
	
  Exhibit F

  	
  -

  	
   

  	
  Form of Assignment and Acceptance Agreement

  

 

v

 

AMENDED AND
RESTATED CREDIT AGREEMENT

 

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

 

R E C I T A L S

 

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

 

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

 

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

 

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

 

SECTION 1                               DEFINITIONS AND TERMS.

 

1.1  Definitions.
 As used herein:

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Borrower  is
defined in the preamble to this Agreement.

 

2

 

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

 

Borrowing Date  is
defined in Section 2.4(a).

 

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

 

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

 

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

 

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

 

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

 

Closing Date  means
December 21, 1998.

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

Default  is defined in Section 11.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

Exchange Agreement is
defined in the recitals.

 

Excluded Taxes  is defined in Section 4.6(a).

 

Execution Date
means [•], 2005.

 

Exhibit  means an exhibit to this Agreement unless
otherwise specified.

 

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

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Indemnified Parties  is defined in Section 12.11.

 

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

 

9

 

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

 

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

 

Interest Period  is defined in Section 3.9.

 

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

 

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

 

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

 

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

 

Litigation  means any action by or before any
Governmental Authority.

 

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

 

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

 

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

 

10

 

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

 

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

 

(a)  Borrower;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

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

 

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

 

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

 

Other Required Guarantor  is defined in Section 6.3.

 

Other Taxes  is defined in Section 4.6(b).

 

Participant  is defined in Section 14.13(e).

 

Payment Default  means any Default described in Section 11.1.

 

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

 

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

 

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

 

Person  means any individual, entity, or Governmental
Authority.

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

Register  is
defined in Section 14.13(c).

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

Stock  means all
shares, options, warrants, general or limited partnership interests, membership
interests, or other ownership interests (regardless of how designated) of or in
a corporation, partnership, limited liability company, trust, or other entity,
whether voting or nonvoting, including common stock, preferred stock, or any other
“equity security” (as such term
is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended).

 

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

 

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

 

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

 

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

 

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

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

SECTION 2                               BORROWING PROVISIONS.

 

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

 

(a)   each Borrowing requested by Borrower
hereunder must occur on a Business Day and no later than the Business Day
immediately preceding the Termination Date;

 

(b)   each Borrowing requested by Borrower must be
in an amount not less than $5,000,000 or a greater multiple of $1,000,000;

 

(c)   the Commitment Usage may not exceed the Total
Commitment;

 

(d)   each Lender’s Principal Debt may not exceed
such Lender’s Committed Sum; and

 

(e)   any amounts repaid may not be reborrowed.

 

2.2  [Intentionally Omitted]

 

2.3  Termination of Commitments.

 

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

 

17

 

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

 

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

 

2.4  Borrowing Procedure. The following procedures
apply to Borrowings:

 

(a)   Notice of
Borrowing.  Each Borrowing
shall be made pursuant to a Notice of Borrowing delivered to Administrative
Agent requesting that Lenders fund a Borrowing on a certain date (the “Borrowing Date”), which notice (i) shall
be irrevocable and binding on Borrower, (ii) shall specify the Borrowing Date,
amount, Type, and (for a Borrowing comprised of Eurodollar Borrowings) Interest
Period, and (iii) must be received by Administrative Agent no later than (A)
3:00 p.m. New York, New York time on the third (3rd) Business Day preceding the
Borrowing Date for any Eurodollar Borrowing, and (B) 12:00 p.m. New York, New
York time on the Borrowing Date for any Base Rate Borrowing.  Administrative Agent shall timely notify each
Lender with respect to each Notice of Borrowing.  Notwithstanding the foregoing, no Borrowing
shall be a Base Rate Borrowing except pursuant to Sections 4.1, 4.2 or 4.3.

 

(b)   Funding.  Each Lender shall remit its Pro Rata Part of
each requested Borrowing to Administrative Agent’s principal office in Dallas,
in funds which are or will be available for immediate use by Administrative
Agent by 2:00 p.m. New York, New York time on the Borrowing Date therefor.  Subject to receipt of such funds,
Administrative Agent shall (unless to its actual knowledge any of the
conditions precedent therefor have not been satisfied by Borrower or waived by
Required Lenders) make such funds available to Borrower by causing such funds
to be deposited to Borrower’s account as designated to Administrative Agent by
Borrower.  Notwithstanding the foregoing,
unless Administrative Agent shall have been notified by a Lender prior to a
Borrowing Date that such Lender does not intend to make available to
Administrative Agent such Lender’s Pro Rata Part of the applicable Borrowing,
Administrative Agent may assume that such Lender has made such proceeds
available to Administrative Agent on such date, as required herein, and
Administrative Agent may (unless to its actual knowledge any of the conditions
precedent therefor have not been satisfied by Borrower or waived by Required
Lenders), in reliance upon such assumption (but shall not be required to), make
available to Borrower a corresponding amount in accordance with the foregoing
terms, but, if

 

18

 

such corresponding amount is
not in fact made available to Administrative Agent by such Lender on such
Borrowing Date, then Administrative Agent shall be entitled to recover such
corresponding amount on demand (i) from such Lender, together with interest at
the Federal Funds Rate during the period commencing on the date such
corresponding amount was made available to Borrower and ending on (but
excluding) the date Administrative Agent recovers such corresponding amount
from such Lender, or (ii) if such Lender fails to pay such corresponding amount
forthwith upon such demand, then from Borrower, together with interest at a
rate per annum equal to the applicable rate for such Borrowing during the
period commencing on such Borrowing Date and ending on (but excluding) the date
Administrative Agent recovers such corresponding amount from Borrower.  No Lender shall be responsible for the
failure of any other Lender to make its Pro Rata Part of any Borrowing.

 

2.5  [Intentionally Omitted]

 

SECTION 3                               TERMS
OF PAYMENT.

 

3.1  Loan Accounts and Payments.

 

(a)   Loan
Accounts.

 

(i)    The
Obligation payable to each Lender shall be evidenced by one or more loan accounts
or records maintained by such Lender in the ordinary course of business.  The loan accounts or records maintained by
Administrative Agent and each Lender shall be conclusive evidence absent
manifest error of the amount of the Obligation owing to each Lender.  Any failure to so record or any error in
doing so shall not, however, limit or otherwise affect the obligation of
Borrower hereunder to pay any amount owing to any Lender with respect to the
Obligation.

 

(ii)   Upon
the request of any Lender made through Administrative Agent, the Principal Debt
of the Obligation owing to such Lender may be evidenced by one or more Notes in
addition to loan accounts.  Each such
Note shall be in substantially the form of Exhibit
B and be executed by Borrower and payable to the order of such
Lender in the maximum original principal amount equal to such Lender’s
Committed Sum.  Each such Lender may
endorse on the schedules annexed to its Note(s) the date, amount, and maturity
of each Borrowing made by it and the amount of each payment of principal made
by Borrower with respect thereto and each Lender’s record shall be conclusive
absent manifest error; provided, however,
that the failure of a Lender to make, or an error by a Lender in making, a
notation thereon with respect to any Borrowing shall not limit or otherwise
affect the obligations of Borrower hereunder or under any such Note to such
Lender.

 

(b)   Payments
Generally.  Each payment or
prepayment on the Obligation is due and must be paid at Administrative Agent’s
principal office in New York in funds which are or will be available for
immediate use by Administrative Agent at or before 2:00 p.m. New York, New York
time on the day due.  Payments made after
2:00 p.m., New York, New York time shall be deemed made on the Business Day
next following.  Administrative Agent
shall pay to each Lender any payment or prepayment to which such Lender is
entitled hereunder on the same day

 

19

 

Administrative Agent shall have
received the same from Borrower; provided
that such payment or prepayment is received by Administrative Agent
at or before 2:00 p.m. New York, New York time, and otherwise at or before 2:00
p.m. New York, New York time on the Business Day next following.  If and to the extent Administrative Agent
shall not make such payments to Lenders when due as set forth in the preceding
sentence, then such unpaid amounts shall accrue interest, payable by
Administrative Agent, at the Federal Funds Rate froth the due date until (but not
including) the date on which Administrative Agent makes such payments to
Lenders.

 

3.2  Interest and Principal Payments.

 

(a)   Interest
Payments.  Interest on each
Eurodollar Borrowing shall be due and payable as it accrues on the last day of
its respective Interest Period and on the Termination Date, as applicable.  Interest on each Base Rate Borrowing shall be
due and payable as it accrues on each March 31, June 30, September 30, and
December 31, and on the Termination Date.

 

(b)   Mandatory
Payments.

 

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

 

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

 

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

 

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

 

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

 

20

 

(c)   Voluntary
Prepayments.  After giving
Administrative Agent advance telephonic notice (promptly followed by written
notice) of the intent to prepay, Borrower may voluntarily prepay all or any
part of the Principal Debt from time to time and at any time, in whole or in
part, without premium or penalty; provided
that: (i) such notice must be received by Administrative Agent at or
before 2:00 p.m. New York, New York time on (A) the third (3rd) Business Day
preceding the date of prepayment of a Eurodollar Borrowing, and (B) the
Business Day of a prepayment of a Base Rate Borrowing; (ii) each such partial
prepayment must be in a minimum amount of at least $5,000,000 or a greater
integral multiple of $1,000,000 thereof (if a Eurodollar Borrowing or a Base
Rate Borrowing); (iii) all accrued interest on any Eurodollar Borrowing being
prepaid must also be paid in full, to the date-of such prepayment; and (iv)
Borrower shall pay any related Consequential Loss within ten (10) days after
demand therefor.  Each notice of prepayment
shall specify the prepayment date and the Type of Borrowing(s) and amount(s) of
such Borrowing(s) to be prepaid and shall constitute a binding obligation of
Borrower to make a prepayment on the date stated therein unless such notice is
given in connection with the payment in full of all Borrowings under this
Agreement, the termination of the Total Commitment, and a termination of this
Agreement in which case the parties hereto acknowledge that such payment may
(subject to any Consequential Loss) occur on a date after the date given in such
notice as a result of normal delays with respect to such payment.

 

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

 

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

 

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

 

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

 

21

 

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

 

3.7  Interest Calculations.

 

(a)   All payments of interest shall be calculated
on the basis of actual number of days (including the first (1st) day but
excluding the last day) elapsed but computed as if each calendar year consisted
of 360 days in the case of a Eurodollar Borrowing (unless such calculation
would result in the interest on the Borrowings exceeding the Maximum Rate, in
which event such interest shall be calculated on the basis of a year of 365 or
366 days, as the case may be), and 365 or 366 days, as the case may be, in the
case of a Base Rate Borrowing.  All
interest rate determinations and calculations by Administrative Agent shall be
conclusive and binding absent manifest error.

 

(b)   The provisions of this Agreement relating to
the calculation of the Base Rate and the Adjusted Eurodollar Rate are included
only for the purpose of determining the rate of interest or other amounts to be
paid hereunder that are based upon such rate.

 

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

 

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

 

22

 

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

 

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

 

3.11        Order of Application.

 

(a)   If no Default exists, then payments and
prepayments of the Obligation shall be applied in the order and manner as
Borrower may direct in writing.

 

(b)   If a Default exists (or if Borrower fails to
give directions as permitted under Section
3.11(a)), then any payment or prepayment (including proceeds from
the exercise of any Rights) shall be applied to the Obligation in the following
order: (i) to the ratable payment of all fees, expenses, and indemnities for
which the Credit Parties have not been paid or reimbursed in accordance with
the Loan Documents; (ii) to the ratable payment of accrued and unpaid interest
on the Total Principal Debt; (iii) to the ratable payment of the Total
Principal Debt; and (iv) to the payment of the remaining Obligation in the
order and manner Required Lenders deem appropriate.

 

(c)   Subject to the provisions of Section 13 and provided that
Administrative Agent shall not in any event be bound to inquire into or to
determine the validity, scope, or priority of any interest or entitlement of
any Credit Party and may suspend all payments or seek appropriate relief
(including, without limitation, instructions from Required Lenders or an action
in the nature of interpleader) in the event of any doubt or dispute as to any
apportionment or distribution contemplated hereby, Administrative Agent shall
promptly distribute such amounts to each Credit Party in accordance with the
Agreement and the related Loan Documents.

 

23

 

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

 

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

 

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

 

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

 

24

 

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

 

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

 

SECTION 4                               CHANGE
IN CIRCUMSTANCES.

 

4.1  Increased Cost and Reduced Return.

 

(a)   Change in
Laws.  If, after the date
hereof, the adoption of any applicable Law, or any change in any applicable
Law, or any change in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof, or compliance by any Lender (or its Applicable Lending Office) with
any request or directive (whether or not having the force of law) of any such
Governmental Authority:

 

(i)            shall subject such
Lender (or its Applicable Lending Office) to any tax, duty, or other charge
with respect to any Eurodollar Borrowing, its Note (if any), or its obligation
to make Eurodollar Borrowings, or change the basis of taxation of any amounts
payable to such Lender (or its Applicable Lending Office) under this Agreement
or its Note (if any) in respect of any Eurodollar Borrowings (other than taxes
imposed on the overall gross or net income of such Lender or franchise taxes
imposed on such Lender, in each case by the jurisdiction in which such Lender
has its principal office or such Applicable Lending Office);

 

(ii)           shall
impose, modify, or deem applicable any reserve, special deposit, assessment, or
similar requirement (other than the Reserve Requirement utilized in the
determination of the Adjusted Eurodollar Rate) relating to any extensions of
credit or other assets of, or any deposits with or other liabilities or
commitments of, such Lender, (or its Applicable Lending Office), including the
Commitment of such Lender hereunder; or

 

(iii)          shall
impose on such Lender (or its Applicable Lending Office) or the London
interbank market any other condition affecting this Agreement or its Note (if
any) or any of such extensions of credit or liabilities or commitments;

 

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

 

25

 

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

 

(b)   Capital
Adequacy.  If, after the date
hereof, any Lender shall have determined that the adoption of any applicable
Governmental Requirement regarding capital adequacy or any change therein or in
the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of law)
of any such Governmental Authority, has or would have the effect of reducing
the rate of return on the capital of such Lender or any corporation controlling
such Lender as a consequence of such Lender’s obligations hereunder to a level
below that which such Lender or such corporation could have achieved but for
such adoption, change, request, or directive (taking into consideration its
policies with respect to capital adequacy), then from time to time upon demand
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction.

 

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

 

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

 

(a)   Administrative Agent determines (which
determination shall be conclusive) that by reason of circumstances affecting
the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period; or

 

26

 

(b)   Required Lenders determine (which
determination shall be conclusive) and notify Administrative Agent that the
Adjusted Eurodollar Rate will not adequately and fairly reflect the cost to
Lenders of funding Eurodollar Borrowings for such Interest Period;

 

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

 

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

 

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

 

(a)   to the extent that such Lender’s Eurodollar
Borrowings have been so Converted, all payments and prepayments of principal
that would otherwise be applied to such Lender’s Eurodollar Borrowings shall be
applied instead to its Base Rate Borrowings; and

 

(b)   all Borrowings that would otherwise be made
or Continued by such Lender as Eurodollar Borrowings shall be made or Continued
instead as Base Rate Borrowings, and all Borrowings of such Lender that would
otherwise be Converted into Eurodollar Borrowings shall be Converted instead
into (or shall remain as) Base Rate Borrowings.

 

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

 

27

 

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

 

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

 

(a)   any payment, prepayment, or Conversion of a
Eurodollar Borrowing for any reason (including, without limitation, the
acceleration of the Obligation pursuant to Section
12.1) on a date other than the last day of the Interest Period for
such Borrowing; or

 

(b)   any failure by Borrower for any reason
(including, without limitation, the failure of any condition precedent
specified in Section 7.2 to be
satisfied) to borrow, Convert, Continue, or prepay a Eurodollar Borrowing on
the date for such borrowing, Conversion, Continuation, or prepayment specified
in the relevant Borrowing Notice.

 

4.6  Taxes.

 

(a)   Any and all payments by Borrower to or for
the account of any Credit Party hereunder or under any other Loan Document
shall be made free and clear of and without deduction for any and all present
or future Taxes arising after the date hereof, excluding,
in the case of each Credit Party, Taxes based on or measured by its gross or
net income, and franchise taxes imposed on it, by the jurisdiction under the
laws of which such Credit Party (or its Applicable Lending Office) is organized
or any political subdivision thereof (such income and franchise Taxes being “Excluded Taxes”).  If Borrower shall be required by law to
deduct any Taxes (other than Excluded Taxes) from or in respect of any sum
payable under this Agreement or any other Loan Document to any Credit Party,
then (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums payable
under this Section 4.6) such
Credit Party receives an amount equal to the sum it would have received had no
such deductions been made, (ii) Borrower shall make such deductions, (iii)
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with all Laws, and (iv) Borrower shall, upon
the request of Administrative Agent, furnish to Administrative Agent, at its
address referred to in Section 14.3,
the original or a certified copy of a receipt evidencing payment thereof.

 

(b)   In addition, Borrower agrees to pay any and
all present or future stamp or documentary Taxes and any other excise or
property Taxes or charges or similar levies which arise from any payment made
under this Agreement or any other Loan Document or from the execution or
delivery of, or otherwise with respect to, this Agreement or any other Loan
Document (hereinafter referred to as “Other
Taxes”).

 

(c)   Borrower agrees to indemnify each Credit
Party for the full amount of Taxes (other than Excluded Taxes) and Other Taxes
(including, without limitation, any Taxes (other than Excluded Taxes) or Other
Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 4.6) paid by such Credit Party (as
the case may be) and any liability (including penalties, interest, and
expenses) arising therefrom or with respect thereto.  If any Credit Party

 

28

 

receives a refund in respect of
any Taxes or Other Taxes in which it has been indemnified by Borrower pursuant
to this Section 4.6, then such
Credit Party shall promptly notify Borrower of such refund and shall promptly,
upon receipt, repay such refund to Borrower.

 

(d)   Each Lender organized under the laws of a
jurisdiction outside the United States, on or prior to the date of its
execution and delivery of this Agreement in the case of each Lender listed on
the signature pages hereof and on or prior to the date on which it becomes a
Lender in the case of each other Lender, and from time to time thereafter if
requested in writing by Borrower or Administrative Agent (but only so long as
such Lender remains lawfully able to do so), shall provide Borrower and
Administrative Agent with (i) Internal
Revenue Service Form 1001 or 4224,
as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Lender is entitled to benefits under an income
tax treaty to which the United States is a party which reduces the rate of
withholding tax on payments of interest or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any successor form
prescribed by the Internal Revenue Service, and (iii) any other form or
certificate required by any taxing authority (including any certificate
required by Sections 871(h) and 881(c) of the Code), certifying that such
Lender is entitled to an exemption from or a reduced rate of tax on payments
pursuant to this Agreement or any of the other Loan Documents.

 

(e)   For any period with respect to which a Lender
has failed to provide Borrower and Administrative Agent with the appropriate
form pursuant to Section 4.6(d)
(unless such failure is due to a change in Law occurring subsequent to the date
on which a form originally was required to be provided), such Lender shall not
be entitled to indemnification under Sections
4.6(a) or (b) with
respect to Taxes imposed by the United States; provided,
however, that should a Lender, which is otherwise exempt from or
subject to a reduced rate of withholding tax, become subject to Taxes (other
than Excluded Taxes) because of its failure to deliver a form required
hereunder, Borrower shall take such steps as such Lender shall reasonably
request to assist such Lender to recover such Taxes.

 

(f)    If Borrower is required to pay additional
amounts to or for the account of any Lender pursuant to this Section 4.6, then such Lender will agree
to use reasonable efforts to change the jurisdiction of its Applicable Lending
Office so as to eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Lender, is not
otherwise disadvantageous to such Lender.

 

(g)   Without prejudice to the survival of any
other agreement of Borrower hereunder, the agreements and obligations of
Borrower contained in this Section 4.6
shall survive the termination of the Total Commitment and the payment in full
of the Obligation.

 

SECTION 5                               FEES.

 

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

 

29

 

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

 

5.2  [Intentionally Omitted]

 

5.3  [Intentionally Omitted]

 

5.4  [Intentionally Omitted]

 

5.5  [Intentionally Omitted]

 

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

 

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

 

SECTION 6                               GUARANTIES.

 

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

 

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

 

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

 

SECTION 7                               CONDITIONS
PRECEDENT.

 

7.1  [Intentionally Omitted]

 

30

 

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

 

(a)   Notice of
Borrowing.  Administrative
Agent shall have received, in accordance with the provisions of Sections 2.1 and 2.4, an originally executed Notice of
Borrowing.

 

(b)   Representations
and Warranties; Performance of Agreements.  As of the date of such Borrowing, the
representations and warranties in Loan Documents are true, correct, and
complete in all material respects (unless they speak to a specific date or are
based on facts which have changed by transactions expressly contemplated or
permitted by this Agreement).

 

(c)   No Default.  No Unmatured Default, Default, or Material
Adverse Event exists or would be caused by the making of such Borrowing.

 

(d)   No
Injunction or Restraining Order. 
No order, judgment, or decree of any Governmental Authority shall
purport to enjoin or restrain any Lender from making the Borrowing to be made
by it.

 

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

 

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

 

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

 

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

 

31

 

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

 

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

 

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

 

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

 

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

 

32

 

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

 

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

 

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

 

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

 

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

 

33

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

34

 

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

 

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

 

8.19        [Intentionally Omitted]

 

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

 

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

 

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

 

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

 

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

 

(a)   Annual
Financial Statements. 
Promptly after preparation, and no later than one hundred and twenty
(120) days after the last day of each fiscal year of POI, Financial Statements
showing the consolidated financial condition and results of operations for the
Companies, as of, and for the year ended on, such day, each accompanied by:

 

(i)            the
opinion of a firm of nationally-recognized independent certified public
accountants, based on an audit using generally accepted auditing standards,
that such Financial Statements were prepared in accordance with GAAP and
present fairly the consolidated financial condition and results of operations
of the Companies in all material respects; and

 

(ii)           a
Compliance Certificate.

 

35

 

(b)   Periodic
Financial Statements. 
Promptly after preparation, and no later than sixty (60) days after the
last day of each fiscal quarter of the Companies, Financial Statements showing
the consolidated financial condition and results of operations calculated for
the Companies for such fiscal quarter and for the period from the beginning of
the then-current fiscal year to, such last day, accompanied by a Compliance
Certificate with respect to such Financial Statements.

 

(c)   Budget.  On or prior to March 31 of each fiscal year
of the Companies, the consolidated financial budget for the Companies for such
fiscal year.

 

(d)   Notices of
Litigation, Defaults, Etc. 
Notice, promptly after Borrower knows or has reason to know of (i) the
existence and status of any Litigation which could, if adversely determined,
reasonably be expected to be a Material Adverse Event, or of any order or
judgment for the payment of money which (individually or collectively) is in excess
of $25,000,000, or any warrant of attachment, sequestration, or similar
proceeding against the assets of any Company having a value (individually or
collectively) of $25,000,000 and not covered by insurance or indemnified in a
manner reasonably acceptable to Administrative Agent, (ii) any material change
in any material fact or circumstance represented or warranted in any Loan
Document, (iii) an Unmatured Default or Default specifying the nature thereof
and what action Borrower or any other Company has taken, is taking, or proposes
to take with respect thereto, (iv) the receipt by any Company of notice of any
violation or alleged violation of any Environmental Law, which violation or
alleged violation could individually or collectively with other such violations
or allegations, be a Material Adverse Event, or (v) (A) the occurrence of a
Reportable Event that, alone or together with any other Reportable Event, could
reasonably be expected to result in liability of any Company to the PBGC in an
aggregate amount exceeding $25,000,000; (B) any expressed statement in writing
on the part of the PBGC of its intention to terminate any Employee Plan or
Plans; (C) Borrower’s or an ERISA Affiliate’s becoming obligated to file with
the PBGC a notice of failure to make a required installment or other payment
with respect to an Employee Plan; or (D) the receipt by Borrower or an ERISA
Affiliate from the sponsor of a Multiemployer Plan of either a notice
concerning the imposition of withdrawal liability in an aggregate amount
exceeding $25,000,000 or of the impending termination or reorganization of such
Multiemployer Plan.

 

(e)   SEC Filings.  Promptly after the filing thereof, a true,
correct, and complete copy of each Form
10-K, Form 10-Q, and Form 8-K
filed by or on behalf of any Company with the Securities and Exchange
Commission.

 

(f)    Change in
Ratings.  Promptly upon the
receipt of notice thereof, and in any event within five (5) Business Days after
any change in the Moody’s Rating or the S & P Rating, notice of such
change.

 

(g)   Other
Information.  Promptly upon
request therefor by any Credit Party, such information (not otherwise required
to be furnished under the Loan Documents) respecting the business affairs,
assets, and liabilities of the Companies, and such opinions, certifications,
and documents, in addition to those mentioned in this Agreement, as reasonably
requested (other than privileged and confidential communications between any
Company and its legal advisors).

 

36

 

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

 

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

 

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

 

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

 

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

 

37

 

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

 

9.10        [Intentionally Omitted]

 

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

 

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

 

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

 

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

 

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

 

38

 

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

 

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

 

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

 

(i)            pledges
or deposits made to secure payment of worker’s compensation, or to participate
in any fund in connection with worker’s compensation, unemployment insurance,
pensions, or other social security programs;

 

(ii)           pledges
or deposits made to secure performance of bids, tenders, insurance or other
contacts (other than for the repayment of borrowed money), or leases, or to
secure statutory obligations, surety or appeal bonds, or indemnity,
performance, or other similar bonds as all such Liens arise in the ordinary
course of business of the Companies;

 

(iii)          encumbrances
consisting of zoning restrictions, easements, rights-of-way, covenants, minor
exceptions to title, or other restrictions on the use of real property, none of
which impair in any material respect the use of such property by the Person in
question in the operation of its business, and none of which is violated by
existing or proposed structures or land use (where such violation could be a
Material Adverse Event);

 

(iv)          Liens
of landlords or of mortgagees of landlords on fixtures and movable property
located on premises leased in the ordinary course of business;

 

(v)           claims
and Liens for Taxes (A) that are not due and payable, or (B) in which the
applicability, amount, or validity of which is being contested in good faith by
appropriate proceedings diligently conducted, and against which reserves or
other provisions required by GAAP have been made and levy and execution thereon
have been stayed and continue to be stayed;

 

(vi)          claims
and Liens of mechanics, materialmen, warehousemen, carriers, landlords, or
other like Liens in which (A) the amounts due thereunder are not overdue for a
period of more than thirty (30) days, or (B) the applicability, amount, or
validity of which is being contested in good faith by appropriate proceedings
diligently conducted,

 

39

 

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

 

(vii)         Liens
in existence on the date hereof listed on Schedule
10.3, securing Debt existing as of the Execution Date and any
refinancings, renewals, or extensions thereof (without any increase in the
principal amount thereof);

 

(viii)        Liens
on assets acquired pursuant to a Permitted Acquisition securing Debt of any
Company assumed in connection with such Permitted Acquisition not to exceed
fifteen percent (15%) of the aggregate consideration for such Permitted
Acquisition;

 

(ix)           any
interest or title of a lessor under any lease entered into by any Company in
the ordinary course of its business and covering only the assets so leased;

 

(x)            any
obligations or duties affecting any of the properties of any Company to any
municipality or public authority with respect to any franchise, grant, license,
or permit which do not materially impair the use of such property for the
purposes for which it is held;

 

(xi)           liens
imposed by operation of law with respect to any judgments or orders not
constituting a Default;

 

(xii)          Liens
of landlords or of mortgagees of landlords on fixtures and movable property
located on premises leased in the ordinary course of business;

 

(xiii)         Liens
arising from precautionary Uniform Commercial Code financing statement filings
with respect to operating leases entered into by any Company in the ordinary
course of business;

 

(xiv)        licenses,
leases, or subleases permitted hereunder granted to others not interfering in
any material respect with the business of any Company;

 

(xv)         Liens
in favor of banking institutions arising by operation of law encumbering
deposits (including the right of setoff) held by such banking institution
incurred in the ordinary course of business and which are within the general
parameters customary in the banking industry; and

 

(xvi)        Liens
not otherwise permitted by this Section 10.3
provided that the aggregate
outstanding principal amount of the obligations secured thereby does not exceed
$25,000,000 in the aggregate at any time outstanding.

 

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

 

40

 

(a)   the
payment of reasonable and customary fees and reimbursement of expenses payable
to directors of any Company;

 

(b)   the
employment arrangements with respect to the procurement of services of
directors, officers, and employees in the ordinary course of business and the
payment of reasonable fees in connection therewith;

 

(c)   the
transactions, agreements, and arrangements contemplated by the Exchange
Agreement; and

 

(d)   any
other transaction between Affiliates otherwise expressly permitted by this
Agreement.

 

10.5        Compliance with Documents.  Borrower shall not, and shall not permit any
other Company to, (a) violate the provisions of its Constituent Documents, or
(b) modify, repeal, replace, or amend any provision of its Constituent
Documents, in each case where such action could be a Material Adverse Event.

 

10.6        Fiscal Year and Accounting Methods
..  Borrower shall not, and
shall not permit any other Company to, change its fiscal year for book
accounting purposes; provided that POI
and Borrower may change their respective fiscal year with the prior written
consent of Administrative Agent, such consent not to be unreasonably withheld.

 

10.7        New Business.  Borrower shall not, and shall not permit any
other Company (other than Subsidiaries of POI that in the aggregate contribute
five percent (5%) or less of the consolidated total assets of the Companies as
of the last day of the immediately preceding fiscal year of the Companies) to,
directly or indirectly, permit or suffer to exist any material change in the type
of businesses in which it is engaged from the businesses of the Companies as
conducted on the Execution Date or reasonable extensions thereof.

 

10.8        Loans, Advances, and Investments.  Borrower shall not, and shall not permit any
other Company to, make any loan, advance, extension of credit, or capital
contribution to, make any investment in, or purchase or commit to purchase any
Stock or evidences of Debt of, or interests in, any other Person, other than:
(a) readily marketable, direct, full faith and credit obligations of the United
States of America, or obligations guaranteed by the full faith and credit of
the United States of America, maturing within not more than one year from the
date of acquisition; (b) short term certificates of deposit and time deposits,
which mature within one year from the date of issuance and which are fully
insured by the Federal Deposit Insurance Corporation; (c) commercial paper
maturing in 365 days or less from the date of issuance and rated either “P-1” by Moody’s, or “A-1” by S & P; (d) debt instruments of
a domestic issuer which mature in one (1) year or less and which are rated “A”
or better by Moody’s or S & P on the date of acquisition of such
investment; (e) demand deposit accounts which are maintained in the ordinary
course of business; (f) Permitted Acquisitions; (g) trade accounts receivable
which are for goods furnished or services rendered in the ordinary course of
business and are payable in accordance with customary trade terms; (h)
investments by the Companies in Domestic Subsidiaries as of the Execution Date
and formed in accordance with the terms of this Agreement; (i) loans and
advances by the Companies to their respective directors, officers, and 

 

41

 

employees in
an aggregate principal amount not to exceed $2,500,000 in the aggregate at any
time outstanding; (j) loans, advances, or investments existing on the Execution
Date and listed on Schedule 10.8,
and extensions, renewals, modifications, restatements, or replacements thereof;
(k) investments consisting of Debt of any Company to any other Company; (l)
promissory notes and other similar non-cash consideration received by any
Company in connection with the dispositions permitted by Section 10.11; (m) investments in
Financial Hedge Agreements; (n) investments received in connection with the
bankruptcy or reorganization or suppliers and customers in settlement of
delinquent obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business; [(o) investments of (i) the
Companies (other than Foreign Subsidiaries) in Foreign Subsidiaries in an
aggregate amount not to exceed at any one time outstanding fifteen percent
(15%) of the consolidated total assets of the Companies determined in
accordance with GAAP for the most recent fiscal year (without regard to any
write down or write up thereof)], and (ii) Foreign Subsidiaries in other
Foreign Subsidiaries; and (p) in addition to the foregoing, other investments
by the Companies in an aggregate amount not exceeding five percent (5%) of the
consolidated total assets of the Companies determined in accordance with GAAP
for the most recent fiscal year (without regard to any write down or write up
thereof).

 

10.9        Distributions and Subordinated Debt
Payments.

 

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

 

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

 

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

 

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

 

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

 

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

 

42

 

10.10      Restrictions on Companies. 
Borrower shall not, and shall not permit any other Company to, enter
into or permit to exist any material arrangement or agreement (other than the
Loan Documents and, solely with respect to Foreign Subsidiaries, the agreements
evidencing the Debt permitted by Section
10.2) which directly or indirectly prohibits any Subsidiary of
Borrower from (i) declaring, making, or paying, directly or indirectly, any
Distribution to Borrower, (ii) paying any Debt owed to Borrower, (iii) making
loans, advances, or investments to Borrower, or (iv) transferring any of its
property or assets to Borrower.

 

10.11      Sale of Assets.  Borrower shall not, and shall not permit any
other Company to, sell, assign, transfer, or otherwise dispose of any of its
assets, other than (a) sales of inventory and equipment leases [(including,
without limitation, equipment leases originated or acquired by C.E.T., S.A. or
its Subsidiaries)] in the ordinary course of business, (b) the sale, discount
or transfer of delinquent accounts receivable in the ordinary course of
business for purposes of collection, (c) sales of immaterial assets for
consideration not less than fair market value thereof, (d) dispositions of
obsolete assets and assets no longer useful in the respective businesses of the
Companies, (e) transfers resulting from any casualty or condemnation of
property or assets, (f) licenses or sublicenses of intellectual property and
general intangibles and licenses, leases or subleases of other property in each
case in the ordinary course of business and that do not materially interfere
with the business of any Company, [(g) licenses granted pursuant to the
Trademark License Agreement,] and (h) other asset sales during any fiscal year
of the Companies in an aggregate amount not exceeding (other than with the
consent of Administrative Agent) ten percent (10%) of the consolidated total
assets of the Companies determined in accordance with GAAP for the most recent
fiscal year (without regard to any write down or write up thereof).

 

10.12      Mergers and Dissolutions; Sale of
Capital Stock.  Borrower
shall not, and shall not permit any other Company to, directly or indirectly,
merge or consolidate with any other Person, other than (a) as a result of a Permitted
Acquisition, (b) mergers or consolidations involving Borrower if Borrower is
the surviving entity, and (c) mergers among Wholly-owned Companies; provided that in any merger involving
Borrower (including a Permitted Acquisition effected as a merger), Borrower
must be the surviving entity, and, in any merger involving any other Company
(including a Permitted Acquisition effected as a merger), a Company must be the
surviving entity.  Borrower shall not,
and shall not permit any other Company to, liquidate, wind up, or dissolve (or
suffer any liquidation or dissolution), other than liquidations, wind ups, or
dissolutions incident to mergers permitted under this Section 10.12.

 

10.13      Financial Covenants.  As calculated on a consolidated basis for the
Companies:

 

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

 

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

 

43

 

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

 

11.1        Payment of Obligation.

 

(a)   The
failure or refusal of Borrower to pay any of the Obligation (other than
principal) when it becomes due and payable under the Loan Documents and such
failure shall continue for five (5) days after such payment became due.

 

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

 

11.2        Covenants.

 

(a)   The
failure or refusal of Borrower (and, if applicable, any other Material Company)
to punctually and properly perform, observe, and comply with any covenant,
agreement, or condition contained in any Section
9.3 or Section 10.

 

(b)   The
failure or refusal of Borrower (and, if applicable, any other Material Company)
to punctually and properly perform, observe, and comply with any covenant,
agreement, or condition contained in any Loan Document (other than the
covenants to pay the Obligation and the covenants in (a) preceding) and, if such failure is capable of being
cured within the appropriate time, then such failure shall continue for thirty
(30) days after the earlier to occur of the date (i) any Responsible Officer
knows of, or (ii) Borrower receives notice from Administrative Agent of, such
failure or refusal.

 

11.3        Debtor Relief.  Any Material
Company (a) shall not be Solvent, (b) fails to pay its Debts generally as they
become due, (c) voluntarily seeks, consents to, or acquiesces in the benefit of
any Debtor Relief Law, other than as a creditor or claimant, or (d) becomes a
party to or is made the subject of any proceeding provided for by any Debtor
Relief Law, other than as a creditor or claimant, that could suspend or
otherwise adversely affect the Rights of any Credit Party granted in the Loan
Documents (unless, in the event
such proceeding is involuntary, the petition instituting same is dismissed
within sixty (60) days after its filing).

 

11.4        Judgments and Attachments.  Any Material Company fails, within sixty (60)
days after entry, to pay, bond, or otherwise discharge any judgment or order
for the payment of money in excess of $25,000,000 (individually or
collectively) and not paid or covered by insurance or indemnified in a manner
reasonably acceptable to Administrative Agent, or any warrant of attachment,
sequestration, or similar proceeding against any Material Company’s assets
having a value (individually or collectively) of $25,000,000 which is not
stayed on appeal.

 

11.5        Misrepresentation.  Any representation or warranty made by any
Company contained in any Loan Document shall at any time prove to have been
incorrect in any material respect when made.

 

44

 

11.6        Change of Control.

 

POI shall
cease to own, directly or indirectly, one hundred percent (100%) of the voting
control (directly or indirectly) of Borrower.

 

11.7        Default Under Other Debt and Agreements.

 

(a)   The
occurrence of any “default” or “event of default” or other breach which
remains uncured after the expiration of any period of grace, notice, or right
to cure, if any, or unwaived on any date of determination under or with respect
to the Senior Notes or any Subordinated Debt; or

 

(b)   The
trustee with respect to, or any holder of, the Senior Notes or any Subordinated
Debt shall effectively declare all or any portion of such Debt or obligation
thereunder due and payable prior to the stated maturity thereof; or

 

(c)   Any
Material Company fails to pay when due (after lapse of any applicable grace
periods) any Debt of such Material Company (other than the Obligation) in
excess (individually or collectively) of $25,000,000.

 

11.8        Employee Benefit Plans.

 

(a)   A
“Reportable Event” or “Reportable Events,” or a failure to make a
required installment or other payment (within the meaning of Section 412(n)(1) of the Code), shall have
occurred with respect to any Employee Plan or Employee Plans that is reasonably
expected to result in liability of Borrower to the PBGC or to a Plan in an
aggregate amount exceeding $25,000,000; or

 

(b)   Borrower
or any ERISA Affiliate has provided to any affected party a sixty (60) day notice
of intent to terminate an Employee Plan pursuant to a distress termination in
accordance with Section 4041(c)
of ERISA if the liability reasonably expected to be incurred as a result of
such termination will exceed $25,000,000; or

 

(c)   A
trustee shall be appointed by a United States district court to administer any
Employee Plan; or

 

(d)   the
PBGC shall institute proceedings (including giving notice of intent thereof) to
terminate any Employee Plan; or

 

(e)   (i)  Borrower
or any ERISA Affiliate shall have been notified by the sponsor of a
Multiemployer Plan that it has incurred withdrawal liability (within the
meaning of section 4201 of ERISA)
to such Multiemployer Plan, (ii) Borrower or such ERISA Affiliate does not have
reasonable grounds for contesting such withdrawal liability or is not
contesting such withdrawal liability in a timely and appropriate manner and
(iii) the amount of such withdrawal liability specified in such notice, when
aggregated with all other amounts required to be paid to Multiemployer Plans in
connection with withdrawal liabilities (determined as of the date or dates of
such notification), exceeds $25,000,000; or

 

(f)    Borrower
or any ERISA Affiliate shall have been notified by the sponsor of a
Multiemployer Plan that such Multiemployer Plan is in reorganization or is
being terminated,

 

45

 

within the meaning of Title IV of ERISA, if solely as a result
of such reorganization or termination the aggregate annual contributions of
Borrower and its ERISA Affiliates to all Multiemployer Plans that are then in
reorganization or have been or are being terminated have been or will be
increased over the amounts required to be contributed to such Multiemployer
Plans for their most recently completed plan years by an amount exceeding
$25,000,000.

 

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

 

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

 

SECTION 12        RIGHTS AND REMEDIES.

 

12.1        Remedies Upon Default.

 

(a)   If
a Default exists under Section 11.3(c)
or 11.3(d), then the commitment
to extend credit hereunder shall automatically terminate and the entire unpaid
balance of the Obligation shall automatically become due and payable without
any action or notice of any kind whatsoever.

 

(b)   If
any Default exists, then Administrative Agent may with the consent of Required
Lenders (and, subject to the terms of Section
13, shall upon the request of Required Lenders) do any one or more
of the following: (i) if the maturity of the Obligation has not already been
accelerated under Section 12.1(a),
then declare the entire unpaid balance of the Obligation, or any part thereof,
immediately due and payable, whereupon it shall be due and payable; (ii)
terminate the commitments of Lenders to extend credit hereunder; (iii) reduce
any claim to judgment; (iv) to the extent permitted by Law, exercise (or
request each Lender to, and each Lender shall be entitled to, exercise) the
Rights of offset or banker’s Lien against the interest of any Company in and to
every account and other property of any Company which are in the possession of
any Credit Party to the extent of the full amount of the Obligation (to the
extent permitted by Law, Borrower being deemed directly obligated to each
Credit Party in the full amount of the Obligation for such purposes); provided, however, such Credit Party shall
thereafter promptly notify Borrower and Administrative after any such offset
and the application made by such Lender; and (v) exercise any and all other
legal or equitable Rights afforded by the Loan Documents, the Laws of the State
of New York, or any other applicable jurisdiction as Administrative Agent shall
deem appropriate, or otherwise, including, but not limited to, the 

 

46

 

Right to bring suit or other proceedings
before any Governmental Authority either for specific performance of any
covenant or condition contained in any of the Loan Documents or in aid of the
exercise of any Right granted to any Credit Party in any of the Loan Documents.

 

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

 

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

 

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

 

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

 

47

 

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

 

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

 

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

 

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

 

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

 

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

 

48

 

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

 

49

 

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

 

SECTION 13        AGREEMENT AMONG LENDERS.

 

13.1        Administrative Agent.

 

(a)   Appointment.  Each Lender hereby appoints POI Acquisition
(and POI Acquisition hereby accepts such appointment) as its nominee and agent,
in its name and on its behalf: (i) to act as nominee for and on behalf of such
Lender in and under all Loan Documents; (ii) to arrange the means whereby the
funds of Lenders are to be made available to Borrower under the Loan Documents;
(iii) to take such action as may be requested by any Lender under the Loan
Documents (when such Lender is entitled to make such request under the Loan
Documents and after such requesting Lender has obtained the concurrence of such
other Lenders as may be required under the Loan Documents); (iv) to receive all
documents and items to be furnished to Lenders under the Loan Documents; (v) to
timely distribute, and Administrative Agent agrees to so distribute, to each
Lender all material information, requests, documents, and items received from
any Company under the Loan Documents; (vi) to promptly distribute to each
Lender its ratable part of each payment or prepayment (whether voluntary, as
proceeds of collateral upon or after foreclosure, as proceeds of insurance
thereon, or otherwise) in accordance with the terms of the Loan Documents;
(vii) to deliver to the appropriate Persons requests, demands, approvals, and
consents received from Lenders; and (viii) to execute, on behalf of Lenders,
such releases or other documents or instruments as are permitted by the Loan
Documents or as directed by Lenders from time to time; provided, however, Administrative Agent
shall not be required to take any action which exposes Administrative Agent to
personal liability or which is contrary to the Loan Documents or applicable
Law.

 

(b)   Successor Agent.  Administrative Agent may resign at any time
as Administrative Agent under the Loan Documents by giving written notice
thereof to Lenders and may be removed as Administrative Agent under the Loan
Documents at any time with cause by Required Lenders.  Should the initial or any successor
Administrative Agent ever cease to be a party hereto or should the initial or
any successor Administrative Agent ever resign or be removed as Administrative
Agent, then Required Lenders shall elect the successor Administrative Agent
from among Lenders (other than the resigning Administrative Agent).  If no successor Administrative Agent shall
have been so appointed by Required Lenders, within thirty (30) days after the
retiring Administrative Agent’s giving of notice of resignation or Required
Lenders’ removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of Lenders, appoint a successor
Administrative Agent, which successor Administrative Agent shall, unless a
Payment Default exists, be reasonably acceptable to Borrower. Upon the
acceptance of any appointment as Administrative Agent under the Loan Documents
by a successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the Rights of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its
duties and obligations of Administrative Agent under the Loan Documents, and
each Lender shall execute such documents as any Lender may reasonably request
to reflect such change in and under the Loan Documents.  After any retiring Administrative Agent’s
resignation or removal as Administrative Agent under the Loan

 

50

 

Documents, the provisions of this Section 13 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Administrative
Agent under the Loan Documents.

 

(c)   Rights as Lender.  Administrative Agent, in its capacity as a
Lender, shall have the same Rights under the Loan Documents as any other Lender
and may exercise the same as though it were not acting as Administrative Agent;
the term “Lender’’ shall, unless
the context otherwise indicates, include Administrative Agent; and any
resignation, or removal of by Administrative Agent hereunder shall not impair
or otherwise affect any Rights which it has or may have in its capacity as an
individual Lender.  Each Lender and
Borrower agree that Administrative Agent is not a fiduciary for Lenders or for
Borrower but simply is acting in the capacity described herein to alleviate
administrative burdens for both Borrower and Lenders, that Administrative Agent
has no duties or responsibilities to Lenders or Borrower except those expressly
set forth herein, and that Administrative Agent in its capacity as a Lender has
all Rights of any other Lender.

 

(d)   Other Activities.  Administrative Agent and its Affiliates may
now or hereafter be engaged in one or more loan, letter of credit, leasing, or
other financing transactions with any Company, act as trustee or depositary for
any Company, or otherwise be engaged in other transactions with any Company
(collectively, the “other activities”)
not the subject of the Loan Documents. 
Without limiting the Rights of Lenders specifically set forth in the
Loan Documents, Administrative Agent and its Affiliates shall not be
responsible to account to Lenders for such other activities, and no Lender
shall have any interest in any other activities, any present or future
guaranties by or for the account of any Company which are not contemplated or
included in the Loan Documents, any present or future offset exercised by
Administrative Agent and its Affiliates in respect of such other activities,
any present or future property taken as security for any such other activities,
or any property now or hereafter in the possession or control of Administrative
Agent or its Affiliates which may be or become security for the obligations of
any Company arising under the Loan Documents by reason of the general
description of indebtedness secured or of property contained in any other
agreements, documents or instruments related to any such other activities;
provided that if any payments in respect of such guaranties or such property or
the proceeds thereof shall be applied to reduction of the obligations of any
Obligor arising under the Loan Documents, then each Lender shall be entitled to
share in such application ratably.

 

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

 

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

 

51

 

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

 

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

 

13.5        Limitation of Liability.

 

(a)   Exculpation.  Neither Administrative Agent nor any of its
Representatives shall be liable for any action taken or omitted to be taken by
it or them under the Loan Documents in good faith and reasonably believed by it
or them to be within the discretion or power conferred upon it or them by the
Loan Documents or be responsible for the consequences of any error of judgment,
except for fraud, gross negligence, or willful misconduct; and neither the
Administrative Agent nor any of its Representatives has a fiduciary
relationship with any Lender by virtue of the Loan Documents (provided  that
nothing herein shall negate the obligation of Administrative Agent
to account for funds received by it for the account of any Lender).

 

(b)   Indemnity. 
Unless indemnified to its satisfaction against loss, cost, liability,
and expense, Administrative Agent shall not be compelled to do any act under
the Loan Documents or to take any action toward the execution or enforcement of
the powers thereby created or to prosecute or defend any suit in respect of the
Loan Documents.  If Administrative Agent
requests instructions from Lenders or Required Lenders, as the case may be,
with respect to any act or action (including, but not limited to, any failure
to act) in connection with any Loan Document, such Administrative Agent shall
be entitled (but shall not be required) to refrain (without incurring any
liability to any Person by so refraining) from such act or action unless and
until it has received such instructions. 
Except where action of Required Lenders or all Lenders is required in
the Loan Documents, Administrative Agent may act hereunder in its own
discretion without requesting instructions. 
In no event, however, shall Administrative Agent or any of its 

 

52

 

Representatives be required to take any
action which it or they determine could incur for it or them criminal or
onerous civil liability.  Without limiting
the generality of the foregoing, no Lender shall have any right of action
against Administrative Agent as a result of Administrative Agent’s acting or
refraining from acting hereunder in accordance with the instructions of
Required Lenders (or all Lenders if required in the Loan Documents).

 

(c)   Reliance. 
Administrative Agent shall not be responsible in any manner to any
Lender or any Participant for, and each Lender represents and warrants that it
has not relied upon Administrative Agent in respect of, (i) the
creditworthiness of any Company and the risks involved to such Lender, (ii) the
effectiveness, enforceability, genuineness, validity, or the due execution of
any Loan Document, (iii) any representation, warranty, document, certificate,
report, or statement made therein or furnished thereunder or in connection
therewith, (iv) the existence, priority, or perfection of any Lien, if any, now
or hereafter granted or purported to be granted under any Loan Document, or (v)
observation of or compliance with any of the terms, covenants, or conditions of
any Loan Document on the part of any Company. 
EACH LENDER AGREES TO INDEMNIFY ADMINISTRATIVE AGENT AND ITS
REPRESENTATIVES AND HOLD THEM HARMLESS FROM AND AGAINST (BUT LIMITED TO SUCH
LENDER’S PRO RATA PART OF) ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, REASONABLE EXPENSES, AND
REASONABLE DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED
ON, ASSERTED AGAINST, OR INCURRED BY THEM IN ANY WAY RELATING TO OR ARISING OUT
OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED BY THEM UNDER THE LOAN
DOCUMENTS (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF
ADMINISTRATIVE AGENT OR ITS REPRESENTATIVES), TO THE EXTENT ADMINISTRATIVE
AGENT AND ITS REPRESENTATIVES ARE NOT REIMBURSED FOR SUCH AMOUNTS BY ANY
COMPANY (PROVIDED THAT NEITHER
ADMINISTRATIVE AGENT NOR ANY OF ITS REPRESENTATIVES SHALL NOT HAVE THE RIGHT TO
BE INDEMNIFIED HEREUNDER FOR ITS OR THEIR OWN FRAUD, GROSS NEGLIGENCE, OR
WILLFUL MISCONDUCT).

 

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

 

53

 

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

 

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

 

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

 

13.10      [Intentionally Omitted]

 

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

 

SECTION 14        MISCELLANEOUS.

 

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

 

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

 

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

 

54

 

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

 

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

 

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

 

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

 

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

 

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

 

55

 

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

 

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

 

56

 

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

 

14.11      Amendments, Consents, Conflicts, and Waivers.

 

(a)   Except
as otherwise specifically provided, (i) this Agreement may only be amended,
modified or waived by an instrument in writing executed jointly by Borrower and
Required Lenders, and, in the case of any matter affecting Administrative Agent
(except removal of Administrative Agent as provided in Section 13) by Administrative Agent, and
may only be supplemented by documents delivered or to be delivered in
accordance with the express terms hereof, and (ii) the other Loan Documents may
only be the subject of an amendment, modification, or waiver if Borrower and
Required Lenders, and, in the case of any matter affecting Administrative Agent
(except as set forth above), Administrative Agent, have approved same.

 

(b)   Any
amendment to or consent or waiver under this Agreement or any Loan Document
which purports to accomplish any of the following must be by an instrument in
writing executed by Borrower and executed (or approved, as the case may be) by
each Lender affected thereby, and, in the case of any matter affecting
Administrative Agent, by Administrative Agent: (i) extends the due date or
reduces the amount of any scheduled payment of the Obligation or any scheduled
reduction of the Total Commitment beyond the date specified in the Loan
Documents; (ii) reduces the interest rate or decreases the amount of interest,
fees, or other sums payable to the Credit Parties hereunder (except such
reductions as are contemplated by this Agreement and reductions in the interest
rate as a result of the waiver of the payment of interest at the Default Rate);
(iii) changes the definition of “Applicable
Margin” (other than changes having the effect of increasing such
Applicable Margin) or “Total Commitment;”
or (iv) changes this clause (b).  Without the consent of such Lender, no
Lender’s “Committed Sum” may be
increased.

 

(c)   Any
amendment to or consent or waiver under this Agreement or any Loan Document
which purports to accomplish any of the following must be by an instrument in
writing executed by Borrower and executed (or approved, as the case may be) by
each Lender, and, in the case of any matter affecting Administrative Agent, by
Administrative Agent: (i) changes the definition of “Pro Rata,” “Pro Rata Part,”
“Required Lenders,” or “Termination Date;” (ii) except as
otherwise permitted by any Loan Document, waives compliance with, amends, or
releases (in whole or in part) any Guaranty or releases (in whole or in part)
or waives the requirement to provide any Guaranty or any collateral, if any,
for the Obligation except to the extent expressly permitted herein or in any
other Loan Document; (iii) changes this clause
(c) or any other matter specifically requiring the consent of all Lenders
hereunder; or (iv) subordinates any of the Obligation to any other Debt of the
Companies.  Without the consent of such
Lender, no Lender’s “Committed Sum”
may be increased.

 

(d)   Any
conflict or ambiguity between the terms and provisions herein and terms and
provisions in any other Loan Document shall be controlled by the terms and
provisions herein.

 

57

 

(e)   No
course of dealing nor any failure or delay by any Credit Party or any of its
Representatives with respect to exercising any Right of any Credit Party
hereunder shall operate as a waiver thereof. 
A waiver must be in writing and signed by Administrative Agent and
Required Lenders (or by all Lenders, if required hereunder) to be effective,
and such waiver will be effective only in the specific instance and for the
specific purpose for which it is given.

 

(f)    Notwithstanding
the foregoing, any increase in the interest rate or amount of interest, fees,
or other sums payable to the Credit Parties may be agreed to by Administrative
Agent and Borrower without the prior written consent of any Lender.

 

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

 

14.13      Successors and Assigns; Assignments and
Participations.

 

(a)   This
Agreement shall be binding upon, and inure to the benefit of the parties hereto
and their respective successors and assigns, except that (i) Borrower may not,
directly or indirectly, assign or transfer, or attempt to assign or transfer,
any of its Rights, duties or obligations under any Loan Documents without the
express written consent of all Lenders, and (ii) except as permitted under this
Section 14.13, no Lender may
transfer, pledge, assign, sell any participation in, or otherwise encumber its
portion of the Obligation.

 

(b)   Each
Lender may assign to one or more Eligible Assignees all or a portion of its
Rights and obligations under this Agreement and the other Loan Documents
(including, without limitation, all or a portion of its Borrowings and its
Notes, if any); provided, however,
that:

 

(i)            each such
assignment shall be to an Eligible Assignee;

 

(ii)           except in the case
of an assignment to another Lender or an assignment of all of a Lender’s Rights
and obligations under this Agreement and the other Loan Documents, any such
partial assignment shall be in an amount not less than $1,000,000;

 

(iii)          each such
assignment by a Lender shall be of a constant, and not varying, percentage of
all of its Rights and obligations under this Agreement;

 

(iv)          the parties to such
assignment shall execute and deliver to Administrative Agent for its acceptance
(such acceptance not to be unreasonably withheld) an Assignment and Acceptance
Agreement in the form of Exhibit F hereto,
together with any Notes subject to such assignment and a processing fee of
$3,500.

 

58

 

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

 

(c)   Administrative
Agent shall maintain at its address referred to in Section 14.3 a copy of each Assignment and Acceptance
Agreement delivered to and accepted by it and a register for the recordation of
the names and addresses of Lenders and the Commitment, and principal amount of
the Borrowings owing to, each Lender from time to time (the “Register”).  The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and Borrower,
Administrative Agent and Lenders may treat each.  Person whose name is recorded in the Register
as a Lender hereunder for all purposes of the Loan Documents.  The Register shall be available for
inspection by Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.  Upon
the consummation of any assignment in accordance with this Section 14.13, Schedule 2.1 shall automatically be deemed amended (to the
extent required) by Administrative Agent to reflect the name, address, and
respective Committed Sums of the assignor and assignee.

 

(d)   Upon
its receipt of an Assignment and Acceptance Agreement executed by the parties
thereto, together with any Notes, if any, subject to such assignment and
payment of the processing fee, Administrative Agent shall, if such Assignment
and Acceptance has been completed and is in substantially the form of Exhibit F hereto, (i) accept such
Assignment and Acceptance Agreement, (ii) record the information contained
therein in the Register, and (iii) give prompt notice thereof to the parties
thereto.

 

(e)   Subject
to the provisions of this Section and
in accordance with applicable Law, any Lender may, in the ordinary course of
its commercial banking business and in accordance with applicable Law, at any
time sell to one or more Persons (each a “Participant”)
participating interests in its portion of the Obligation.  In the event of any such sale to a
Participant, (i) such Lender shall remain a “Lender”
under this Agreement and the Participant shall not constitute a “Lender” hereunder, (ii) such Lender’s
obligations under this Agreement shall remain unchanged, (iii) such Lender
shall remain solely responsible for the performance thereof, (iv) such Lender
shall remain the holder of its share of the Principal Debt for all purposes under
this Agreement, (v) Borrower and Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender’s Rights
and obligations under the Loan Documents, and (vi) such Lender shall be solely
responsible for any withholding taxes or any fling or reporting requirements
relating to such participation and shall hold Borrower and Administrative Agent
and their respective successors, permitted assigns, officers, directors,
employees, agents, and representatives harmless against the same.  Participants shall have no Rights under the
Loan Documents, other than certain voting Rights as provided below.  Subject 

 

59

 

to the following, each Lender shall be
entitled to obtain (on behalf of its Participants) the benefits of Section 4 with respect to all
participations in its part of the Obligation outstanding from time to time so
long as Borrower shall not be obligated to pay any amount in excess of the
amount that would be due to such Lender under Section
4 calculated as though no participation have been made.  No Lender shall sell any participating
interest under which the Participant shall have any Rights to approve any
amendment, modification, or waiver of any Loan Document, except to the extent
such amendment, modification, or waiver extends the due date for payment of any
amount in respect of principal (other than mandatory prepayments), interest, or
fees due under the Loan Documents, reduces the interest rate or the amount of
principal or fees applicable to the Obligation (except such reductions as are
contemplated by this Agreement), or releases any material Guaranty or all or
any substantial portion of any collateral, if any, for the Obligation under the
Loan Documents (except such releases as are contemplated by this Agreement); provided that in those cases where a
Participant is entitled to the benefits of Section
4 or a Lender grants Rights to its Participants to approve
amendments to or waivers of the Loan Documents respecting the matters
previously described in this sentence, such Lender must include a voting
mechanism in the relevant participation agreement or agreements, as the case
may be, whereby a majority of such Lender’s portion of the Obligation (whether
held by such Lender or Participant) shall control the vote for all of such
Lender’s portion of the Obligation. 
Except in the case of the sale of a participating interest to another
Lender, the relevant participation agreement shall not permit the Participant
to transfer, pledge, assign, sell participations in, or otherwise encumber its
portion of the Obligation, unless the consent of the transferring Lender (which
consent will not be unreasonably withheld) has been obtained.

 

(f)    Notwithstanding
any other provision set forth in this Agreement, any Lender may at any time
assign and pledge all or any portion of its Borrowings and any Notes to any
Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular
issued by such Federal Reserve Bank.  No
such assignment shall release the assigning Lender from its obligations
hereunder.

 

(g)   Any
Lender may furnish any information concerning the Companies in the possession
of such Lender from time to time to Eligible Assignees and Participants
(including prospective Eligible Assignees and Participants).

 

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

 

60

 

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

 

 

[REMAINDER OF PAGE INTENTIONALLY BLANK.

SIGNATURE PAGES FOLLOW.]

 

61

 

SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT
AGREEMENT

AMONG

PROTECTION ONE ALARM MONITORING, INC., AS BORROWER,

POI ACQUISITION, L.L.C., AS ADMINISTRATIVE AGENT,

AND

THE LENDERS NAMED HEREIN

 

EXECUTED as of the day and year first above
written.

 

 

	
   

  	
  PROTECTION ONE ALARM MONITORING INC., a 

  Delaware corporation, as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT
AGREEMENT

AMONG

PROTECTION ONE ALARM MONITORING, INC., AS BORROWER,

POI ACQUISITION, L.L.C., AS ADMINISTRATIVE AGENT,

AND

THE LENDERS NAMED HEREIN

 

 

	
   

  	
  POI ACQUISITION, L.L.C.,

  
	
   

  	
  as Administrative Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT
AGREEMENT

AMONG

PROTECTION ONE ALARM MONITORING, INC., AS BORROWER,

POI ACQUISITION, L.L.C., AS ADMINISTRATIVE AGENT,

AND

THE LENDERS NAMED HEREIN

 

 

	
   

  	
  QUADRANGLE MASTER FUNDING LTD.,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

EXHIBIT A-1

 

COMPLIANCE
CERTIFICATE

 

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

 

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

 

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

 

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

 

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

 

5.             No Unmatured Default or Default
exists.

 

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

 

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

 

 

	
   

  	
  (a)

  	
  Leverage Ratio.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Consolidated Debt

  	
   

  	
  $

  	
   

  	
  (1)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Consolidated EBITDA (See Schedule 1)

  	
   

  	
   

  	
  (2)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Ratio of (1) to (2)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Maximum Permitted

  	
   

  	
  5.75 to 1.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Interest Coverage Ratio.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Consolidated EBITDA (See  Schedule 1)

  	
   

  	
  $

  	
   

  	
  (1)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Interest Expense

  	
   

  	
   

  	
  (2)

  

 

	
   

  	
   

  	
  Ratio of (1) to (2)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Minimum Required

  	
   

  	
  2.10 to 1.0

  	
   

  

 

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROTECTION ONE ALARM MONITORING, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

EXHIBIT B

 

REVOLVING
CREDIT NOTE

 

	
  $                      

  	
   

  	
  New York, New York

  	
  As of [•],
  2005

  

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

	
   

  	
  PROTECTION ONE ALARM MONITORING, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

EXHIBIT C-1

 

FORM OF NOTICE
OF BORROWING

 

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

 

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

 

	
  (A)

  	
  Date of
  Borrowing*

  	
   

  
	
  (B)

  	
  Amount of
  Borrowing**

  	
   

  
	
  (C)

  	
  Type of
  Borrowing***

  	
   

  
	
  (D)

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

  	
   

  

 

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

 

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

 

(b)   no Unmatured Default or
Default exists;

 

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

 

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

 

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

 

 

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

 

	
   

  	
  PROTECTION ONE ALARM MONITORING, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

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

 

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

 

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

 

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

 

 

EXHIBIT C-2

 

FORM OF NOTICE
OF CONVERSION/CONTINUATION

 

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

 

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

 

	
  (A)

  	
  Date of
  conversion or last day of applicable Interest Period*

  	
   

  
	
  (B)

  	
  Principal
  amount of existing Borrowing being converted or continued**

  	
   

  
	
  (C)

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

  	
   

  
	
  (D)

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

  	
   

  

 

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

 

(a)   no Unmatured Default or
Default exists; and

 

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

 

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

 

 

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

 

	
   

  	
  PROTECTION ONE ALARM MONITORING, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

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

 

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

 

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

 

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

 

 

EXHIBIT D-1

 

FORM OF POI
GUARANTY

 

UNCONDITIONAL
GUARANTY AGREEMENT

 

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

 

R E C I T A L S:

 

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

 

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

 

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

 

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

 

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

 

SECTION 1

 

NATURE AND
SCOPE OF GUARANTY

 

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

 

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

 

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

SECTION 2

 

ADDITIONAL
EVENTS AND CIRCUMSTANCES NOT REDUCING

OR DISCHARGING GUARANTOR’S OBLIGATIONS

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

 

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

 

2.8  Care
and Diligence.  The failure
of any Credit Party or any other party to exercise diligence or reasonable care
or act, fail to act, or comply with any duty in the administration,
preservation, protection, enforcement, sale, application, disposal, or other
handling or treatment of all or any part of the Guaranteed Debt or any
collateral, property, or security at any time securing any portion thereof,
including, without limiting the generality of the foregoing, the failure to
conduct any foreclosure or other remedy fairly, in a commercially reasonable
manner, or in such a way so as to obtain the best possible price or a favorable
price or otherwise act or fail to act;

 

2.9  Status
of Liens.  The fact that any collateral,
security, security interest, or lien contemplated or intended to be given,
created, or granted as security for the repayment of the Guaranteed Debt shall
not be properly perfected or created, or shall prove to be unenforceable or
subordinate to any other security interest or lien, it being recognized and
agreed by Guarantor that Guarantor is not entering into this Guaranty Agreement
in reliance on, or in contemplation of the benefits of, the validity,
enforceability, collectibility, or value of any of the collateral for the
Guaranteed Debt; notwithstanding the foregoing, Guarantor does not hereby waive
or release (expressly or impliedly) any right to be subrogated to the rights of
the Credit Parties in any collateral or security for the Guaranteed Debt after
payment in full of the Guaranteed Debt; Guarantor’s rights of subrogation are,
however, subordinate to the rights, claims, liens, and security interests of
the Credit Parties;

 

2.10        Offset.  Any existing or future right of offset,
claim, or defense of Borrower against the Credit Parties, or any other party,
or against payment of the Guaranteed Debt, whether such right of offset, claim,
or defense arises in connection with the Guaranteed Debt (or the transactions
creating the Guaranteed Debt) or otherwise;

 

 

2.11        Merger.  The reorganization, merger, or consolidation
of Borrower or Guarantor into or with any other corporation or entity;

 

2.12        Preference.  Any payment by Borrower to any Credit Party
is held to constitute a preference under bankruptcy laws, or for any reason any
Credit Party is required to refund such payment or pay such amount to Borrower
or someone else; or

 

2.13        Other
Actions Taken or Omitted.  Any
other action taken or omitted to be taken with respect to the Credit Agreement,
the Guaranteed Debt, or the security and collateral therefor, whether or not
such action or omission prejudices Guarantor or increases the likelihood or
risk that Guarantor will be required to pay the Guaranteed Debt pursuant to the
terms hereof; it is the unambiguous and unequivocal intention of Guarantor that
Guarantor shall be obligated to pay the Guaranteed Debt when due,
notwithstanding any occurrence, circumstance, event, action, or omission
whatsoever, whether contemplated or uncontemplated, and whether or not
otherwise or particularly described herein, except for the full and final
payment and satisfaction of the Guaranteed Debt.

 

 

SECTION 3

 

REPRESENTATIONS
AND WARRANTIES

 

To induce the
Credit Parties to enter into the Credit Agreement and extend credit to
Borrower, Guarantor represents and warrants to the Credit Parties that:

 

3.1  Benefit.  Guarantor has received, or will receive,
direct or indirect benefit from the making of this Guaranty Agreement and the
Guaranteed Debt and this Guaranty Agreement is in the best interests of
Guarantor;

 

3.2  Familiarity
and Reliance.  Guarantor is
familiar with, and has independently reviewed books and records regarding, the
financial condition of Borrower; however, Guarantor is not relying on such
financial condition as an inducement to enter into this Guaranty Agreement;

 

3.3  No
Representation by the Credit Parties.  No Credit Party or any other party has made
any representation, warranty, or statement to Guarantor in order to induce
Guarantor to execute this Guaranty Agreement;

 

3.4  Guarantor’s
Financial Condition.  As of the
date hereof, and after giving effect to this Guaranty Agreement and the
contingent obligation evidenced hereby, Guarantor is, and will be, Solvent;

 

3.5  Legality.  The execution, delivery, and performance by
Guarantor of this Guaranty Agreement and the consummation of the transactions
contemplated hereunder (a) have been duly authorized by all necessary corporate
action of Guarantor, and (b) do not, and will not, contravene or conflict with
any law, statute, or regulation whatsoever to which Guarantor is subject or
constitute a default (or an event which with notice or lapse of time or both
would constitute a default) under, or result in the breach of, any indenture,
mortgage, deed of trust, charge, lien, or any contract, agreement, or other
instrument to which Guarantor is a party or which may be applicable to
Guarantor or any of its assets, or violate any provisions of its Constituent
Documents; this Guaranty Agreement is a legal and binding obligation of
Guarantor and is enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditors’ rights; and

 

3.6  Survival.  All representations and warranties made by
Guarantor herein shall survive the execution hereof.

 

SECTION 4

 

SUBORDINATION
OF CERTAIN INDEBTEDNESS

 

4.1  Subordination
of Guarantor Claims.  As used
herein, the term “Guarantor Claims”
shall mean all debts and liabilities of Borrower to Guarantor, whether such
debts and liabilities now exist or are hereafter incurred or arise, or whether
the obligations of Borrower thereon be direct, contingent, primary, secondary,
several, joint and several, or otherwise, and irrespective of whether such
debts or liabilities be evidenced by note, contract, open account, or
otherwise,

 

 

and
irrespective of the person or persons in whose favor such debts or liabilities
may, at their inception, have been, or may hereafter be created, or the manner
in which they have been or may hereafter be acquired by Guarantor.  The Guarantor Claims shall include without
limitation all rights and claims of Guarantor against Borrower (arising as a
result of subrogation or otherwise) as a result of Guarantor’s payment of all
or a portion of the Guaranteed Debt. 
Until the Guaranteed Debt shall be paid and satisfied in full and
Guarantor shall have performed all of its obligations hereunder, if a Default
exists, then Guarantor shall not receive or collect, directly or indirectly,
from Borrower or any other party any amount upon the Guarantor Claims.

 

4.2  Claims
in Bankruptcy.  In the event
of receivership, bankruptcy, reorganization, arrangement, debtor’s relief, or
other insolvency proceedings involving Borrower as debtor, the Credit Parties
shall have the right to prove its claim in any such proceeding so as to
establish its rights hereunder and receive directly from the receiver, trustee,
or other court custodian dividends and payments which would otherwise be
payable upon Guarantor Claims.  Guarantor
hereby assigns such dividends and payments to the Credit Parties.  Should any Credit Party receive, for
application upon the Guaranteed Debt, any such dividend or payment which is
otherwise payable to Guarantor, and which, as between Borrower and Guarantor,
shall constitute a credit upon the Guarantor Claims, then upon payment to the
Credit Parties in full of the Guaranteed Debt, Guarantor shall become
subrogated to the rights of the Credit Parties to the extent that such payments
to the Credit Parties on the Guarantor Claims have contributed toward the
liquidation of the Guaranteed Debt, and such subrogation shall be with respect
to that proportion of the Guaranteed Debt which would have been unpaid if the
Credit Parties had not received dividends or payments upon the Guarantor
Claims.

 

4.3  Payments
Held in Trust.  In the event
that, notwithstanding Sections 4.1
and 4.2 above, Guarantor should
receive any funds, payment, claim, or distribution which is prohibited by such Sections, then Guarantor agrees to hold in
trust for the Credit Parties, in kind, all funds, payments, claims, or
distributions so received, and agrees that it shall have absolutely no dominion
over such funds, payments, claims, or distributions so received except to pay
them promptly to Administrative Agent, for the benefit of the Credit Parties, and
Guarantor covenants promptly to pay upon demand the same to Administrative
Agent, for the benefit of the Credit Parties.

 

4.4  Liens
Subordinate.  Guarantor
agrees that any liens, security interests, judgment liens, charges, or other
encumbrances upon Borrower’s assets securing payment of the Guarantor Claims
shall be and remain inferior and subordinate to any liens, security interests,
judgment liens, charges, or other encumbrances upon Borrower’s assets securing
payment of the Guaranteed Debt, regardless of whether such encumbrances in
favor of Guarantor or the Credit Parties presently exist or are hereafter
created or attach.  Without the prior
written consent of Administrative Agent, Guarantor shall not (a) exercise or
enforce any creditor’s right it may have against Borrower, or (b) foreclose,
repossess, sequester, or otherwise take steps or institute any action or
proceedings (judicial or otherwise, including, without limitation, the
commencement of, or joinder in, any liquidation, bankruptcy, rearrangement,
debtor’s relief, or insolvency proceeding) to enforce any liens, mortgages,
deeds of trust, security interest, collateral rights, judgments, or other
encumbrances on assets of Borrower held by Guarantor.

 

 

4.5  Notation
of Records.  All promissory notes, accounts
receivable ledgers, or other evidences of the Guarantor Claims accepted by or
held by Guarantor shall, at the request of Administrative Agent, contain a
specific written notice thereon that the indebtedness evidenced thereby is
subordinated under the terms of this Guaranty Agreement.

 

SECTION 5

 

MISCELLANEOUS

 

5.1  Waiver.  No failure to exercise, and no delay in
exercising, on the part of any Credit Party, any right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right.  The rights of the Credit Parties hereunder
shall be in addition to all other rights provided by law.  No modification or waiver of any provision of
this Guaranty Agreement, nor consent to departure therefrom, shall be effective
unless in writing and no such consent or waiver shall extend beyond the
particular case and purpose involved.  No
notice or demand given in any case shall constitute a waiver of the right to
take other action in the same, similar, or other instances without such notice
or demand.

 

5.2  Notices.  Any notices or other communications required
or permitted to be given by this Guaranty Agreement shall be made in accordance
with, and shall be deemed given, as provided in Section 14.3 of the Credit Agreement, to the party to whom
such notice or communication is directed, to the address of such party as
follows:

 

Guarantor:

 

Protection
One, Inc.

6225 North
Highway 161

Suite 400

Irving, Texas 75038

Attention:
                       

 

Credit
Parties:

 

POI
Acquisition, L.L.C.

375 Park
Avenue

New York, NY

Attention:
David Tanner

 

Any party may
change its address for purposes of this Guaranty Agreement by giving notice of
such change to the other party pursuant to this Section 5.2.

 

5.3  Governing
Law.  This Guaranty Agreement has been
prepared, and is intended to be performed in the State of New York, and the
substantive laws of such state shall govern the validity, construction,
enforcement, and interpretation of this Guaranty Agreement.  For purposes of this Guaranty Agreement and
the resolution of disputes hereunder, Guarantor hereby irrevocably submits and
consents to, and waives any objection to, the non-exclusive jurisdiction

 

 

of the
courts of the State of New York located in New York, New York and of the
federal court located in the Southern Judicial District of New York.

 

5.4  Invalid
Provisions.  If any provision of this Guaranty
Agreement is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term of this Guaranty Agreement, such
provision shall be fully severable and this Guaranty Agreement shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part of this Guaranty Agreement, and the remaining
provisions of this Guaranty Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or by
its severance from this Guaranty Agreement, unless such continued effectiveness
of this Guaranty Agreement, as modified, would be contrary to the basic
understandings and intentions of the parties as expressed herein.

 

5.5  Entirety
and Amendments.  This
Guaranty Agreement embodies the entire agreement between the parties and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof, and this Guaranty Agreement may be amended only by an
instrument in writing executed by an authorized officer of the party against
whom such amendment is sought to be enforced.

 

5.6  Parties
Bound; Assignment.  This
Guaranty Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, assigns, and legal
representatives; provided, however,
that Guarantor may not, without the prior written consent of Administrative
Agent, assign any of its rights, powers, duties, or obligations hereunder.

 

5.7  Headings.  Section headings are for convenience of
reference only and shall in no way affect the interpretation of this Guaranty
Agreement.

 

5.8  Rights
and Remedies.  If Guarantor
becomes liable for any indebtedness owing by Borrower to the Credit Parties, by
endorsement or otherwise, other than under this Guaranty Agreement, then such
liability shall not be in any manner impaired or affected hereby and the rights
of the Credit Parties hereunder shall be cumulative of any and all other rights
that the Credit Parties (or any of them) may ever have against Guarantor.  The exercise by the Credit Parties of any
right or remedy hereunder or under any other instrument, or at law or in
equity, shall not preclude the concurrent or subsequent exercise of any other
right or remedy.

 

5.9  WAIVER
OF TRIAL BY JURY.  GUARANTOR
HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS GUARANTY AGREEMENT.  THIS WAIVER IS IRREVOCABLE AND SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, MODIFICATIONS, RENEWALS, EXTENSIONS, OR SUPPLEMENTS
TO THIS GUARANTY AGREEMENT.  IN THE EVENT
OF LITIGATION, THIS GUARANTY AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO
TRIAL BY THE COURT.

 

5.10        Conflicts.  In the event of a conflict between the terms
and conditions of this Guaranty Agreement and the terms and conditions of the
Credit Agreement, the terms and conditions of the Credit Agreement shall
control.

 

 

EXECUTED as of
the day and year first above written.

 

	
   

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  PROTECTION ONE, INC., a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

EXHIBIT D-2

 

FORM OF
SUBSIDIARY GUARANTY

 

UNCONDITIONAL
GUARANTY AGREEMENT

 

THIS GUARANTY AGREEMENT is executed as of [•], 2005, by EACH OF THE
SUBSIDIARIES OF PROTECTION ONE ALARM MONITORING, INC., a Delaware corporation
(“Borrower”), LISTED ON SCHEDULE 1 ATTACHED HERETO or who become a
party hereto pursuant to Section 5.11
below (each a “Guarantor” and
collectively, “Guarantors”) for
the benefit of the Credit Parties defined below.

 

R E C I T A L
S:

 

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

 

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

 

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

 

4.     Each Guarantor will, directly or
indirectly, benefit from the Credit Parties’ extension of credit to Borrower.

 

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

 

SECTION 1

 

NATURE AND
SCOPE OF GUARANTY

 

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

 

 

1.2          Guaranteed Debt Not
Reduced by Offset.  The
Guaranteed Debt, and the liabilities and obligations of Guarantors to the
Credit Parties hereunder, shall not be reduced, discharged, or released because
or by reason of any existing or future offset, claim, or defense of Borrower,
or any other party, against any Credit Party or against payment of the
Guaranteed Debt, whether such offset, claim, or defense arises in connection
with the Guaranteed Debt (or the transactions creating the Guaranteed Debt) or
otherwise (other than the defense of the payment in full of the
Obligation).  Without limiting the
foregoing or Guarantors’ liability hereunder, to the extent that any Credit
Party advances funds or extends credit to Borrower, and does not receive
payments or benefits thereon in the amounts and at the times required or
provided by the Credit Agreement and the other Loan Documents, Guarantors are
absolutely liable, jointly and severally, to make such payments to (and confer
such benefits on) such Credit Party, on a timely basis.

 

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

 

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

 

 

1.5          Payment by
Guarantors.  If all or any part of the
Guaranteed Debt shall not be punctually paid when due, whether at maturity or
earlier by acceleration or otherwise, then Guarantors shall, immediately upon
demand by Administrative Agent, and without presentment, protest, notice of
protest, notice of nonpayment, notice of intention to accelerate or
acceleration, or any other notice whatsoever, pay in lawful money of the United
States of America, the amount due on the Guaranteed Debt to Administrative
Agent, for the benefit of the Credit Parties, at Administrative Agent’s
principal office in New York, New York. 
Such demand(s) may be made at any time coincident with or after the time
for payment of all or part of the Guaranteed Debt, and may be made from time to
time with respect to the same or different items of Guaranteed Debt.  Such demand shall be deemed made, given, and
received in accordance with Section 5.2
hereof.

 

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

 

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

 

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

 

 

and notices
of every kind in connection with this Guaranty Agreement, the Credit Agreement,
the Notes, the other Loan Documents, and any documents or agreements
evidencing, securing, or relating to any of the Guaranteed Debt and the
obligations hereby guaranteed.

 

1.9          Effect of Bankruptcy,
Other Matters.  In the event
that, pursuant to any insolvency, bankruptcy, reorganization, receivership, or
other debtor relief law, or any judgment, order, or decision thereunder, or for
any other reason, (a) any Credit Party must rescind or restore any payment, or
any part thereof, received by such Credit Party in satisfaction of the
Guaranteed Debt, as set forth herein, any prior release or discharge from the
terms of this Guaranty Agreement given to any Guarantor by such Credit Party
shall be without effect, and this Guaranty Agreement shall remain in full force
and effect, or (b) Borrower shall cease to be liable to the Credit Parties for
any of the Guaranteed Debt (other than by reason of the indefeasible payment in
full thereof by Borrower), then the obligations of each Guarantor under this
Guaranty Agreement shall remain in full force and effect.  It is the intention of the Credit Parties and
Guarantors that Guarantors’ obligations hereunder shall not be discharged
except by Guarantor’s performance of such obligations and then only to the
extent of such performance.  Without
limiting the generality of the foregoing, it is the intention of the Credit
Parties and Guarantors that the filing of any bankruptcy or similar proceeding
by or against Borrower or any other person or party obligated on any portion of
the Guaranteed Debt shall not affect the obligations of Guarantors under this
Guaranty Agreement or the rights of the Credit Parties under this Guaranty
Agreement, including, without limitation, the right or ability of the Credit
Parties to pursue or institute suit against any Guarantor for the entire
Guaranteed Debt.

 

1.10        Limitation.  It is the intention of Guarantors and the
Credit Parties that the amount of the Guaranteed Debt shall be in, but not in
excess of, the maximum amount permitted by fraudulent conveyance, fraudulent
transfer, or other similar laws applicable to Guarantors.  Accordingly, notwithstanding anything to the
contrary contained in this Guaranty Agreement or any other agreement or
instrument executed in connection with the payment of any of the Guaranteed
Debt, the amount of the Guaranteed Debt shall be limited to that amount which
after giving effect thereto would not (a) render any Guarantor insolvent, (b)
result in the fair saleable value of the assets of any Guarantor being less
than the amount required to pay its debts and other liabilities (including
contingent liabilities) as they mature, or (c) leave any Guarantor with
unreasonably small capital to carry out its business as now conducted and as
proposed to be conducted, including its capital needs, as such concepts
described in (a), (b), and (c)
herein are determined under applicable law, if the obligations of such
Guarantor hereunder would otherwise be set aside, terminated, annulled, or
avoided for such reason by a court of competent jurisdiction in a proceeding
actually pending before such court.

 

1.11        Loan Documents.  By execution hereof each Guarantor covenants
and agrees that certain representations and warranties set forth in the Loan
Documents are applicable to each Guarantor, and each Guarantor reaffirms that
each such representation and warranty is true and correct.  Each Guarantor acknowledges and agrees that
this Guaranty is subject to the offset provisions of the Loan Documents in
favor of the Credit Parties.  If the
Credit Agreement shall cease to remain in effect for any reason whatsoever
during any period and any part of the Guaranteed Debt remains unpaid, then the
terms, covenants, and agreements incorporated herein by reference shall
nevertheless continue in full force and effect as obligations of each Guarantor
under this Guaranty.  Guarantor shall
take, or refrain from taking, as the case may be, each action

 

 

that is
necessary to be taken or not taken, as the case may be, so that no Unmatured
Default or Default is caused by the failure to take or refrain from taking such
action, as the case may be.

 

SECTION 2

 

ADDITIONAL
EVENTS AND CIRCUMSTANCES NOT REDUCING

OR DISCHARGING GUARANTORS’ OBLIGATIONS

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

2.7          Release of
Collateral, etc.  Any release,
surrender, exchange, subordination, deterioration, waste, loss, or impairment
(including without limitation negligent, willful, unreasonable, or
unjustifiable impairment) of any collateral, property, or security, at any time
existing in connection with, or assuring or securing payment of, all or any
part of the Guaranteed Debt;

 

2.8          Care and Diligence.  The failure of any Credit Party or any other
party to exercise diligence or reasonable care or act, fail to act, or comply
with any duty in the administration, preservation, protection, enforcement,
sale application, disposal, or other handling or treatment of all or any part
of the Guaranteed Debt or any collateral, property, or security at any time
securing any portion thereof, including, without limiting the generality of the
foregoing, the failure to conduct any foreclosure or other remedy fairly, in a
commercially reasonable manner, or in such a way so as to obtain the best
possible price or a favorable price or otherwise act or fail to act;

 

2.9          Status of Liens.  The fact that any collateral, security,
security interest, or lien contemplated or intended to be given, created, or
granted as security for the repayment of the Guaranteed Debt shall not be
properly perfected or created, or shall prove to be unenforceable or
subordinate to any other security interest or lien, it being recognized and
agreed by Guarantors that Guarantors are not entering into this Guaranty
Agreement in reliance on, or in contemplation of the benefits of, the validity,
enforceability, collectibility, or value of any of the collateral for the
Guaranteed Debt; notwithstanding the foregoing, Guarantors do not hereby waive
or release (expressly or impliedly) any right to be subrogated to the rights of
the Credit Parties in any collateral or security for the Guaranteed Debt after
payment in full of the Guaranteed Debt; Guarantors’ rights of subrogation are,
however, subordinate to the rights, claims, liens, and security interests of
the Credit Parties;

 

2.10        Offset.  Any existing or future right of offset,
claim, or defense of Borrower against the Credit Parties, or any other party,
or against payment of the Guaranteed Debt,

 

 

whether such
right of offset, claim, or defense arises in connection with the Guaranteed
Debt (or the transactions creating the Guaranteed Debt) or otherwise;

 

2.11        Merger.  The reorganization, merger, or consolidation
of Borrower or any Guarantor into or with any other corporation or entity;

 

2.12        Preference.  Any payment by Borrower to any Credit Party
is held to constitute a preference under bankruptcy laws, or for any reason any
Credit Party is required to refund such payment or pay such amount to Borrower
or someone else; or

 

2.13        Other Actions Taken or
Omitted.  Any other action taken or omitted
to be taken with respect to the Credit Agreement, the Guaranteed Debt, or the
security and collateral therefor, whether or not such action or omission
prejudices Guarantors or increases the likelihood or risk that Guarantors will
be required to pay the Guaranteed Debt pursuant to the terms hereof; it is the
unambiguous and unequivocal intention of Guarantors that Guarantors shall be
obligated to pay the Guaranteed Debt when due, notwithstanding any occurrence,
circumstance, event, action, or omission whatsoever, whether contemplated or
uncontemplated, and whether or not otherwise or particularly described herein,
except for the full and final payment and satisfaction of the Guaranteed Debt.

 

SECTION 3

 

REPRESENTATIONS
AND WARRANTIES

 

To induce the Credit Parties to enter into
the Credit Agreement and extend credit to Borrower, each Guarantor represents
and warrants to the Credit Parties that:

 

3.1          Benefit.  Guarantor has received, or will receive,
direct or indirect benefit from the making of this Guaranty Agreement and the
Guaranteed Debt and this Guaranty Agreement is in the best interests of
Guarantor;

 

3.2          Familiarity and
Reliance.  Each Guarantor is familiar with,
and has independently reviewed books and records regarding, the financial
condition of Borrower; however, no Guarantor is relying on such financial
condition as an inducement to enter into this Guaranty Agreement;

 

3.3          No Representation by
the Credit Parties.  No Credit
Party or any other party has made any representation, warranty, or statement to
any Guarantor in order to induce any Guarantor to execute this Guaranty
Agreement;

 

3.4          Guarantors’ Financial
Condition.  As of the date hereof, and after
giving effect to this Guaranty Agreement and the contingent obligation
evidenced hereby, each Guarantor is, and will be, Solvent.

 

3.5          Legality.  The execution, delivery, and performance by
each Guarantor of this Guaranty Agreement and the consummation of the
transactions contemplated hereunder (a) have been duly authorized by all
necessary action of each Guarantor, and (b) do not, and will not, contravene or
conflict with any law, statute, or regulation whatsoever to which any Guarantor
is

 

 

subject or
constitute a default (or an event which with notice or lapse of time or both
would constitute a default) under, or result in the breach of, any indenture,
mortgage, deed of trust, charge, lien, or any contract, agreement, or other
instrument to which any Guarantor is a party or which may be applicable to any
Guarantor or any of its assets, or violate any provisions of its Constituent
Documents; this Guaranty Agreement is a legal and binding obligation of each
Guarantor and is enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditors’ rights;

 

3.6          Credit Agreement.  The representations and warranties in the
Credit Agreement with respect to each Guarantor are true and correct; and

 

3.7          Survival.  All representations and warranties made by
Guarantors herein shall survive the execution hereof.

 

SECTION 4

 

SUBORDINATION
OF CERTAIN INDEBTEDNESS

 

4.1          Subordination of
Guarantor Claims.  As used
herein, the term “Guarantor Claims”
shall mean all debts and liabilities of Borrower to any Guarantor, whether such
debts and liabilities now exist or are hereafter incurred or arise, or whether
the obligations of Borrower thereon be direct, contingent, primary, secondary,
several, joint and several, or otherwise, and irrespective of whether such
debts or liabilities be evidenced by note, contract, open account, or
otherwise, and irrespective of the person or persons in whose favor such debts
or liabilities may, at their inception, have been, or may hereafter be created,
or the manner in which they have been or may hereafter be acquired by any
Guarantor.  The Guarantor Claims shall
include without limitation all rights and claims of each Guarantor against
Borrower (arising as a result of subrogation or otherwise) as a result of any
Guarantor’s payment of all or a portion of the Guaranteed Debt.  Until the Guaranteed Debt shall be paid and
satisfied in full and Guarantors shall have performed all of their obligations
hereunder, if a Default exists, then Guarantors shall not receive or collect,
directly or indirectly, from Borrower or any other party any amount upon the
Guarantor Claims.

 

4.2          Claims in Bankruptcy.  In the event of receivership, bankruptcy,
reorganization, arrangement, debtor’s relief, or other insolvency proceedings
involving Borrower as debtor, the Credit Parties shall have the right to prove
its claim in any such proceeding so as to establish its rights hereunder and
receive directly from the receiver, trustee, or other court custodian dividends
and payments which would otherwise be payable upon Guarantor Claims.  Each Guarantor hereby assigns such dividends
and payments to the Credit Parties. 
Should any Credit Party receive, for application upon the Guaranteed
Debt, any such dividend or payment which is otherwise payable to any Guarantor,
and which, as between Borrower and such Guarantor, shall constitute a credit
upon the Guarantor Claims, then upon payment to the Credit Parties in full of
the Guaranteed Debt, such Guarantor shall become subrogated to the rights of
the Credit Parties to the extent that such payments to the Credit Parties on
the Guarantor Claims have contributed toward the liquidation of the Guaranteed
Debt, and such subrogation shall be with respect to that proportion of the
Guaranteed Debt which would have been unpaid if the Credit Parties had not
received dividends or payments upon the Guarantor Claims.

 

 

4.3          Payments Held in
Trust.  In the event that,
notwithstanding Sections 4.1 and 4.2 above, any Guarantor should receive
any funds, payment, claim, or distribution which is prohibited by such Sections, then such Guarantor agrees to
hold in trust for the Credit Parties, in kind, all funds, payments, claims, or
distributions so received, and agrees that it shall have absolutely no dominion
over such funds, payments, claims, or distributions so received except to pay
them promptly to Administrative Agent, for the benefit of the Credit Parties,
and such Guarantor covenants promptly to pay upon demand the same to
Administrative Agent, for the benefit of the Credit Parties.

 

4.4          Liens Subordinate.  Each Guarantor agrees that any liens,
security interests, judgment liens, charges, or other encumbrances upon
Borrower’s assets securing payment of the Guarantor Claims shall be and remain
inferior and subordinate to any liens, security interests, judgment liens,
charges, or other encumbrances upon Borrower’s assets securing payment of the
Guaranteed Debt, regardless of whether such encumbrances in favor of such
Guarantor or the Credit Parties presently exist or are hereafter created or
attached.  Without the prior written
consent of Administrative Agent, no Guarantor shall (a) exercise or enforce any
creditor’s right it may have against Borrower, or (b) foreclose, repossess,
sequester, or otherwise take steps or institute any action or proceedings
(judicial or otherwise, including, without limitation, the commencement of, or
joinder in, any liquidation, bankruptcy, rearrangement, debtor’s relief, or
insolvency proceeding) to enforce any liens, mortgages, deeds of trust,
security interest, collateral rights, judgments, or other encumbrances on
assets of Borrower held by any Guarantor.

 

4.5          Notation of Records.  All promissory notes, accounts receivable
ledgers, or other evidences of the Guarantor Claims accepted by or held by each
Guarantor shall, at the request of Administrative Agent, contain a specific
written notice thereon that the indebtedness evidenced thereby is subordinated
under the terms of this Guaranty Agreement.

 

SECTION 5

 

MISCELLANEOUS

 

5.1          Waiver.  No failure to exercise, and no delay in
exercising, on the part of any Credit Party, any right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right.  The rights of the Credit Parties hereunder
shall be in addition to all other rights provided by law.  No modification or waiver of any provision of
this Guaranty Agreement, nor consent to departure therefrom, shall be effective
unless in writing and no such consent or waiver shall extend beyond the
particular case and purpose involved.  No
notice or demand given in any case shall constitute a waiver of the right to
take other action in the same, similar, or other instances without such notice
or demand.

 

5.2          Notices.  Any notices or other communications required
or permitted to be given by this Guaranty Agreement shall be made in accordance
with, and shall be deemed given, as provided in Section 14.3 of the Credit Agreement to the party to whom
such notice or communication is directed, to the address of such party as
follows:

 

 

Guarantors:

 

c/o Protection One Alarm Monitoring, Inc.

6225 North Highway 161

Suite 400

Irving, Texas 75038

Attention:
                        

 

Credit Parties:

 

POI Acquisition, L.L.C.

375 Park Avenue

New York, NY

Attention: David Tanner

 

Any party may change its address for purposes
of this Guaranty Agreement by giving notice of such change to the other party
pursuant to this Section 5.2.

 

5.3          Governing Law.  This Guaranty Agreement has been prepared,
and is intended to be performed in the State of New York, and the substantive
laws of such state shall govern the validity, construction, enforcement, and
interpretation of this Guaranty Agreement. 
For purposes of this Guaranty Agreement and the resolution of disputes
hereunder, each Guarantor hereby irrevocably submits and consents to, and waives
any objection to, the non-exclusive jurisdiction of the courts of the State of
New York located in New York, New York and of the federal court located in the
Southern Judicial District of New York.

 

5.4          Invalid Provisions.  If any provision of this Guaranty Agreement
is held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Guaranty Agreement, such provision shall be
fully severable and this Guaranty Agreement shall be construed and enforced as
if such illegal, invalid, or unenforceable provision had never comprised a part
of this Guaranty Agreement, and the remaining provisions of this Guaranty
Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid, or unenforceable provision or by its severance from this
Guaranty Agreement, unless such continued effectiveness of this Guaranty
Agreement, as modified, would be contrary to the basic understandings and
intentions of the parties as expressed herein.

 

5.5          Entirety and
Amendments.  This Guaranty Agreement embodies
the entire agreement between the parties and supersedes all prior agreements
and understandings, if any, relating to the subject matter hereof, and this
Guaranty Agreement may be amended only by an instrument in writing executed by
an authorized officer of the party against whom such amendment is sought to be
enforced.

 

5.6          Parties Bound;
Assignment.  This Guaranty Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns, and legal representatives; provided, however, that no Guarantor may, without the prior
written consent of Administrative Agent, assign any of its rights, powers,
duties, or obligations hereunder.

 

5.7          Headings.  Section headings are for convenience of
reference only and shall in no way affect the interpretation of this Guaranty
Agreement.

 

 

5.8          Rights and Remedies.  If any Guarantor becomes liable for any
indebtedness owing by Borrower to the Credit Parties, by endorsement or otherwise,
other than under this Guaranty Agreement, then such liability shall not be in
any manner impaired or affected hereby and the rights of the Credit Parties
hereunder shall be cumulative of any and all other rights that the Credit
Parties (or any of them) may ever have against such Guarantor.  The exercise by the Credit Parties of any
right or remedy hereunder or under any other instrument, or at law or in
equity, shall not preclude the concurrent or subsequent exercise of any other
right or remedy.

 

5.9          WAIVER OF TRIAL BY
JURY.  EACH GUARANTOR HEREBY WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS GUARANTY AGREEMENT. 
THIS WAIVER IS IRREVOCABLE AND SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
MODIFICATIONS, RENEWALS, EXTENSIONS, OR SUPPLEMENTS TO THIS GUARANTY
AGREEMENT.  IN THE EVENT OF LITIGATION,
THIS GUARANTY AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO TRIAL BY THE
COURT.

 

5.10        Conflicts.  In the event of a conflict between the terms
and conditions of this Guaranty Agreement and the terms and conditions of the
Credit Agreement, the terms and conditions of the Credit Agreement shall
control.

 

5.11        Additional Guarantors.  The initial Guarantors hereunder shall be
each of the Subsidiaries of Borrower that are signatories hereto and that are
listed on Schedule 1 attached
hereto.  From time to time subsequent to
the time hereof, additional Subsidiaries of Borrower may become parties hereto
as additional Guarantors (each an “Additional
Guarantor”) by executing a counterpart of this Guaranty Agreement in
the form of Exhibit A attached
hereto.  Upon delivery of any such
counterpart to Administrative Agent, notice of which is hereby waived by
Guarantors, each such Additional Guarantor shall be a Guarantor and shall be a
party hereto as if such Additional Guarantor were an original signatory
hereof.  Each Guarantor expressly agrees
that its obligations arising hereunder shall not be affected or diminished by
the addition or release of any other Guarantor hereunder, or by any election by
Administrative Agent not to cause any Subsidiary of Borrower to become an
Additional Guarantor hereunder.  This
Guaranty Agreement shall be fully effective as to any Guarantor that is or
becomes a party hereto regardless of whether any such person becomes or fails
to become or ceases to be a Guarantor hereunder.

 

5.12        Release of Guarantors.  Pursuant to Section
6.2 of the Credit Agreement any Guarantor may be released from its
obligations under this Guaranty Agreement by Administrative Agent’s execution
of a Release of Guaranty in the form of Exhibit
B attached hereto.  Each
Guarantor expressly agrees that its obligations arising hereunder shall not be
affected or diminished by the release of any other Guarantor hereunder.

 

 

EXECUTED as of the day and year first above
written.

 

 

	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

 

EXHIBIT A [to
Form of Subsidiary Guaranty]

 

COUNTERPART TO
SUBSIDIARY GUARANTY

 

In witness whereof, the undersigned
Additional Guarantor has caused this Guaranty Agreement to be executed and
delivered by its officer thereunto duly authorized as of
                                                    ,
20      .

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME OF ADDITIONAL GUARANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

 

EXHIBIT B [to
Form of Subsidiary Guaranty]

 

FORM OF
RELEASE OF GUARANTOR

 

In witness whereof, the undersigned
Administrative Agent, for itself and on behalf of each of the Credit Parties
(defined below), hereby releases and discharges
                                                                        
from any and all obligations and liabilities of
                                
to the Credit Parties under that certain Unconditional Guaranty Agreement dated
as of
                        ,
2005, executed by the Subsidiaries of Protection One Alarm Monitoring, Inc., a
                                
corporation, described therein in favor of the Credit Parties defined therein.

 

	
   

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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

 

EXHIBIT F

 

FORM OF
ASSIGNMENT AND ACCEPTANCE

 

This Assignment and Acceptance (the “Assignment and Acceptance.”) is made as of
                                            ,
200       (the “Effective
Date”), between
                              
(“Assignor”) and (“Assignee”).

 

Reference is made to that certain Credit
Agreement dated as of [•], 2005 (as modified, amended, renewed,
extended, or restated from time to time, the “Credit
Agreement”) among Protection One Alarm Monitoring, Inc., a Delaware corporation
(“Borrower”), POI Acquisition,
L.L.C., as Administrative Agent (the “Administrative
Agent”), and the Lenders defined therein.  This Assignment and Acceptance is executed
and delivered pursuant to, and as contemplated in, the Credit Agreement.  Capitalized terms used but not defined herein
shall have the meanings assigned thereto in the Credit Agreement.

 

Assignor and Assignee hereby covenant and
agree as follows:

 

1.     Assignor hereby sells and assigns to
Assignee, and Assignee hereby purchases and assumes from Assignor,
$                              
of Assignor’s Committed Sum and Principal Debt, representing a Pro Rata Part of
the Total Commitment and Total Principal Debt of
      % as of the Effective Date.  The foregoing interest for all events and
circumstances shall be deemed such Assignee’s Pro Rata Part (in addition to any
other Pro Rata Part of Assignee, if any) in the Total Commitment, the Total
Principal Debt, the Loan Documents, and all payments made to or received from
Borrower pursuant to the Loan Documents and is subject to the terms and
conditions provided in the Loan Documents.

 

2.     Assignor (a) hereby represents and warrants
to Assignee that Assignor is the legal and beneficial owner of the Pro Rata
Part being assigned by it hereunder and such interest is free and clear of any
adverse claim, and (b) hereby represents and warrants that as of the date
hereof the Pro Rata Part in the Total Commitment and the Total Principal Debt
being assigned hereunder is     % without giving effect to
assignments that are not yet effective.

 

3.     Assignee hereby confirms and acknowledges
that, except as specifically set forth herein, Assignor: (a) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Loan Documents, or the execution, legality, validity, enforceability,
genuineness, sufficiency, or value of the Loan Documents, or any other
instrument or document furnished pursuant thereto; (b) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of Borrower or any other person or entity which is a party to any of
the Loan Documents (collectively, “Other
Party”); and (c) makes no representation or warranty and assumes no
responsibility with respect to the performance or observance by Borrower or any
Other Party of any of its obligations under any of the Loan Documents or any
other instrument or document furnished pursuant thereto.

 

4.     Assignee hereby: (a) confirms that it has
received a copy of the Loan Documents, together with such other documents and
information as it has deemed appropriate to make its

 

 

own credit analysis and
decision to enter into this Assignment and Acceptance; and (b) agrees that it
will, independently and without reliance upon Assignor or any other
counterparty and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents.

 

5.     Assignee hereby: (a) appoints and
authorizes Administrative Agent under the Loan Documents to take such action as
Administrative Agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to Administrative Agent by the terms of the Loan
Documents; and (b) agrees with Assignor for the benefit of Administrative Agent
and Borrower that it will perform all of the obligations which by the terms of
the Loan Documents are required to be performed by it as a counterparty
(including, without limitation, the obligation to make payments pursuant to the
Loan Documents) and that it shall be liable directly to Assignor,
Administrative Agent, Borrower, and, as provided in the Credit Agreement, to
each Lender for the performance of such obligations.

 

6.     If Assignee is organized under the laws of
a jurisdiction outside the United States, it hereby represents and agrees that
it has delivered or will within three (3) days after the date of the execution
of this Agreement deliver to Assignor and Administrative Agent completed and
signed copies of any forms that may be required by the United States Internal
Revenue Service in order to certify Assignee’s exemption from United States
withholding taxes with respect to any payment or distributions made or to be
made to Assignee with respect to the Loan Documents.

 

7.     As of the Effective Date, (a) Assignee
shall be a party to the Loan Documents and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a counterparty
thereunder, and (b) Assignor shall, to the extent provided in this Assignment
and Acceptance, relinquish its rights and be released from its obligations in
the Loan Documents with respect to the Pro Rata Share being assigned hereunder.

 

8.     Assignee hereby represents and warrants as
of the Effective Date:

 

(a)   Assignee has all necessary corporate power
and authority to purchase and own the interest being assigned to it hereunder,
and has all necessary corporate power and authority to perform all its
obligations with respect to this Assignment and Acceptance;

 

(b)   The execution and delivery of this Assignment
and Acceptance and all other instruments and documents executed in connection
herewith have been duly authorized by all requisite corporate action of
Assignee; and

 

(c)   No approval, authorization, order, license,
or consent of, or registration or filing with, any Governmental Authority or
other person is required in connection with this Assignment and Acceptance.

 

9.     This Assignment and Acceptance shall be
governed by, and construed in accordance with, the laws of the State of New
York, without giving effect to the conflict of laws principles thereof.

 

10.   This Agreement may be executed in two or more
counterparts each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

 

 

11.   Assignee’s address for notices and payments
under the Credit Agreement and this Assignment and Acceptance are set forth in Schedule 1 attached hereto and made a part
hereof.  Assignee may by notice in
accordance with the Credit Agreement to Assignor, Administrative Agent, and
Borrower change the address or telex number or facsimile number at which
notices, communications and payments are to be given to it.

 

	
   

  	
  ASSIGNOR:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ASSIGNEE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

	
  ACCEPTED BY
  ADMINISTRATIVE AGENT

  THIS
                    
  DAY OF
                                  

  	
   

  
	
   

  	
   

  
	
  ADMINISTRATIVE
  AGENT:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  CONSENTED TO
  BY BORROWER 

  THIS
                    
  DAY OF
                                  

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BORROWER

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PROTECTION
  ONE ALARM MONITORING, INC., a

  Delaware corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
						

 

ANNEX II

 

AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION

OF

PROTECTION ONE, INC.

 

*   
*    *    *

Adopted in accordance with the provisions

of §242 and §245 of the General Corporation Law

of the State of Delaware

*    *   
*    *

 

The
undersigned, on behalf of Protection One, Inc., a corporation duly organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware (the “Corporation”), DOES HEREBY CERTIFY as follows:

 

FIRST:                                                        The
Corporation filed its original Certificate of Incorporation with the Delaware
Secretary of State on June 21, 1991 (the “Original Certificate”) under
the name of P1 Acquisition Corporation.

 

SECOND:                                        The
Board of Directors of the Corporation duly adopted resolutions in accordance
with Section 242 and Section 245 of the General Corporation Law of the State of
Delaware authorizing the Corporation to amend, integrate and restate the
Certificate of Incorporation of the Corporation in its entirety to read as set
forth in Exhibit A
attached hereto and made a part hereof (the “Amended and Restated
Certificate”).

 

THIRD:                                                     In
accordance with Section 228, Section 242 and Section 245 of the General
Corporation Law of the State of Delaware, the Amended and Restated Certificate
was duly approved and adopted pursuant to a written consent signed by the
holders of at least a majority of the issued and outstanding shares of capital
stock entitled to vote as a class, whether or not entitled to vote thereon, of
the Corporation. Written notice has been given to the stockholders who have not
consented in writing.

 

IN WITNESS
WHEREOF, the undersigned on behalf of the Corporation for the purpose of
amending and restating the Certificate of Incorporation of the Corporation
pursuant to the General Corporation Law of the State of Delaware, under
penalties of perjury does hereby declare and certify that this is the act and
deed of the Corporation and the facts stated herein are true, and accordingly
has hereunto signed this Certificate of Amended and Restated Certificate of
Incorporation this          day of                         ,
2004.

 

 

	
   

  	
  Protection
  One, Inc.,

  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Eric Griffin

  
	
   

  	
   

  	
  Title:

  	
  Secretary

  
					

 

 

Exhibit A

 

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 

OF

 

PROTECTION ONE, INC.

 

Pursuant to Section 245 of the General

Corporation Law of the State of Delaware

 

FIRST:  The name of the corporation is Protection
One, Inc. (the “Corporation”).

 

SECOND:  The address, including street, number, city
and county, of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle 19801.
The name of the registered agent of the Corporation in the State of Delaware at
such address is The Corporation Trust Company.

 

THIRD:  The purpose for which the Corporation is
formed is to engage in any lawful act or activity for which a corporation may
be organized under the General Corporation Law of the State of Delaware.

 

FOURTH:  The total number of shares of all classes of
stock that the Corporation shall have the authority to issue is 155,000,000, of
which 150,000,000 shall be voting common stock, par value One Cent ($0.01) per
share (“Common Stock”), and 5,000,000 shall be preferred stock, par
value Ten Cents ($0.10) per share (“Preferred Stock”).

 

The shares of
Preferred Stock may be issued from time to time in one or more series. The
Board of Directors of the Corporation is hereby authorized from time to time to
designate each series, to establish the number of shares to be included in such
series, and to determine the rights, preferences and privileges of the shares
of each such series and the qualifications, limitations or restrictions
thereof, including but not limited to the determination or alteration of the
dividend rights, dividend rate, conversion rights, voting powers and rights,
rights and terms of redemption, redemption price or prices, and the liquidation
preference of any wholly unissued series of shares of Preferred Stock, or any
of them, and to increase or decrease the number of shares of any series either
prior to or subsequent to the issue of the shares of such series, but not below
the number of shares of such series then outstanding. In case the number of
shares of any series should be so decreased, the shares constituting such
decrease shall resume the status which they had prior to the adoption of the
resolution originally fixing the number of shares of such series.

 

Immediately
upon the filing of this Amended and Restated Certificate of Incorporation, each
share of Common Stock of the Corporation issued and outstanding

 

 

immediately prior to the filing
of this Amended and Restated Certificate of Incorporation shall immediately and
without any action by the holders thereof be combined, changed and reclassified
such that each shareholder shall receive one (1) share of Common Stock for
every fifty (50) shares of Common Stock held by his or her account at the time.
If the reverse stock split described in the immediately preceding sentence
would result in the issuance of any fractional share, the Corporation shall, in
lieu of issuing any fractional share, pay cash equal to the product of such
fraction multiplied by [$        ]. (1)

 

FIFTH:  The Board of Directors is authorized to
adopt, amend or repeal the By-Laws of the Corporation.

 

SIXTH:  Meetings of stockholders shall be held at
such place, within or without the State of Delaware, as may be designated by or
in the manner provided in the By-Laws, or, if not so designated or provided, at
the registered office of the Corporation in the state of Delaware. Elections of
directors need not be by written ballot unless and to the extent that the By-Laws
so provide.

SEVENTH:  No director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director; provided,
however, that the foregoing clause shall not apply to any liability
of a director to the extent provided by applicable law (i) for any breach of
the director’s duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the General Corporation
Law of the State of Delaware or (iv) for any transaction from which the
director derived an improper personal benefit. Neither the amendment nor repeal
of this Article SEVENTH, nor the adoption of any provision of this Amended and
Restated Certificate of Incorporation inconsistent with this Article SEVENTH,
shall be effective with respect to any cause of action, suit, claim or other
matter that, but for this Article SEVENTH, would accrue or arise prior to such
amendment, repeal or adoption of an inconsistent provision.

 

EIGHTH:  Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or between
the Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in
a summary way of the Corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for the Corporation
under the provisions of §291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of §279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three fourths in value of the creditors or class of
creditors, and/or

 

(1)          The
product of the closing price on the business day immediately preceding the date
of the filing of the Amended and Restated Charter (or, if there is no trade on
such date, the closing price on the most recent date for which there was a
trade) multiplied by 50 shall be inserted here.

3

 

of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.

 

NINTH:  The Corporation reserves the right to amend,
alter or repeal any provision contained in this Amended and Restated
Certificate of Incorporation in the manner now or hereafter prescribed by
statute, and all rights of stockholders herein are subject to this reservation.

 

TENTH:  The Corporation elects not to be governed by
Section 203 of the General Corporation Law of the State of Delaware.

 

*                                         *                                         *                                         *

 

4

 

ANNEX III

 

TERM SHEET

FOR

PROTECTION ONE MANAGEMENT INCENTIVE PLAN

 

November 12, 2004

 

Contingent
Stock Appreciation Rights

 

•                  In order to
provide protection against a near-term sale of P1 at a price below the greater
of (i) restructuring enterprise value of $496 million or (ii) the restructuring
enterprise value based on the exercise price of Management’s stock options (see
below), Management would be granted contingent stock appreciation rights (SARs)
representing 10% of P1’s fully-diluted equity.

 

•                  The SAR grants
would occur on the closing date of the restructuring. SAR grants would be
recommended by Management and approved by the Board. If a sale of P1 occurs
before the restructuring closes, P1 agrees to provide management with cash
compensation that is equivalent in value and terms of payment to what they
would have received if the sale had occurred after the SAR and stock option
grants had occurred.

 

•                  The SARs would
vest and be payable to Management upon Quadrangle’s sale of at least 60% of its
equity interest in P1 (a “Qualified Sale”) if
payment upon such sale will not result in the imposition of penalty taxes under
Code Section 409A. If a Qualified Sale occurs and does not permit immediate
payment due to Code Section 409A, the amount otherwise payable to Management will
be deposited in an interest-bearing irrevocable rabbi trust having an
independent trustee who will pay benefits to Management on the fourth
anniversary of grant. If a Qualified Sale does not occur by the fourth
anniversary of grant, and if necessary to ensure that the SARs will not
be subject to penalty taxes under Code Section 409A, the SARs would vest and be
payable on such fourth anniversary, based on an assumed common equity value of
$.15/share.

 

•                  Participant
Eligibility:  To be eligible for payment
under the SAR, Management participants must be employed by P1 or a subsidiary
on the date of the grant and (i) must be so employed on the date of the
Qualified Sale or (ii) the Qualified Sale must occur within one year of a
Qualifying Termination (Termination without Cause or a Termination for Good
Reason as defined in the participant’s Employment Agreement, or by reason of
sale of a subsidiary employing the participant).

 

•                  Base Price (“Base
Price”):  The “Base Price” of each SAR
would be the per share value of a share of common stock of P1 based on a total
enterprise valuation of $440 million at restructuring. The Base Price would
increase by 9% (the “Preferred Return”), compounded annually on each
anniversary of the

 

 

restructuring, and prorated in the event of a sale by Quadrangle of any
of its equity interest in P1 before any such anniversary. Should Quadrangle
sell less than 60% of its equity interest in P1, only the Base
Price applicable to an equivalent percentage of Management’s
SARs would be fixed based on the Preferred Return accretion through the
date of such sale.

 

•                  Exit Price (“Exit
Price”):  The Exit Price is the per share
price paid for the common stock in a Qualified Sale, provided that in no event
would the Exit Price exceed the greater of (i) $0.15 (i.e., the value for a
share of common stock based on a total valuation of $496 million) or (ii) the
exercise price of Management’s stock options granted pursuant to the Stock
Option Plan described herein.

 

•                  SAR Value:  The amount payable in respect of each SAR
would be equal to the Exit Price less the Base Price.

 

•                  Upon a
Qualifying Termination, Management participants would retain their SARs for one
year, after which a terminated participant’s SARs would be reallocated to the
remaining participants as determined by the most senior remaining Management
participant, subject to Board approval not to be unreasonably withheld.

 

Stock
Option Plan

 

•                  Management would
be granted options for 10% of P1’s fully-diluted equity. Option grants would be
recommended by Management and approved by the Board.

 

•                  At management’s
option, the options would be granted (i) upon restructuring at an exercise
price based on the $496 million restructuring value, or (ii) on any day within
90 days of the restructuring at an exercise price equal to the greater of (a)
the exercise price determined in (i); or (b) the closing price of P1’s common
stock on the date of grant specified by management.

 

•                  The options
would vest ratably each month during the 48 months after restructuring. Unvested
options would be forfeited upon termination of employment for any reason,
including sale of a subsidiary employing the participant, but excluding
termination without Cause or for Good Reason. All options (vested and unvested)
would be forfeited upon termination for Cause. Upon Termination without Cause
or for Good Reason, (i) additional months of vesting would be credited as
follows: 12 months, less one month for each two months elapsed from the
restructuring date through the date of such termination; (ii) unvested options
would be forfeited; and (iii) vested options would be exercisable for 1 year.

 

2

 

•                  Following
termination of employment, P1 would have call rights on stock acquired through
vested options until a qualified public offering (QPO) occurs. If termination
is for Cause, P1 would have the right to repurchase shares for the exercise
price paid by the employee. If termination is for other reasons, the purchase
price would be FMV as reasonably determined by the Board, provided that
terminated employees may not transfer any such shares prior to a QPO or a
Qualified Sale.

 

•                  Vesting of
options will not accelerate upon a QPO.

 

Employment
Agreements

 

•                  Existing
employment agreements would be amended, to the extent necessary, to conform to
the terms of the incentive plan.

 

Co-Investment

 

•                  Management would
have the right to invest up to $2 million, in the aggregate, in P1 equity pari passu with Quadrangle. Any such
investment would be made pursuant to a management shareholders agreement
containing customary provisions, including tag-along, drag-along and piggy-back
registration rights. Prior to a QPO or Qualified Sale, Management would be
allowed to transfer shares for tax planning purposes, and to third parties to
the extent that Quadrangle Capital Partners (but not QDRF) sells. E.g.,
if QCP sells 10% of its equity, Management can also sell 10%. Prior to a QPO or
Qualified Sale, QCP would retain a right of first refusal in respect of any
proposed third party transfer by Management.

 

Section
409A Commitment

 

Once the new
Treasury regulations are published, the parties agree to cooperate reasonably
to modify the Management Incentive Plan and the Key Employee Retention Plan, as
needed, in a manner that avoids tax penalties for management.

 

3

 

ANNEX IV

 

REGISTRATION
RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and
entered into as of         
     , 2005, by and among Quadrangle Master Funding
Ltd, a Cayman Islands limited company (“QDRF”), POI Acquisition, LLC, a
Delaware limited liability company (“POI Acquisition”), and Protection
One, Inc., a Delaware corporation (the “Company”), and each other Person
who becomes a Holder (as defined below) hereunder.

 

RECITALS

 

WHEREAS, (i) POI Acquisition owns two-thirds of the outstanding shares
of common stock of POI Acquisition I, Inc (“PAII”), which directly owns
approximately 88% of the outstanding shares of common stock of the Company, and
QDRF owns one-third of the outstanding shares of common stock of PAII and (ii)
POI Acquisition owns two-thirds of the lenders’ rights under a Revolving Credit
Facility with Protection One Alarm Monitoring, Inc, (“POAM”) a
wholly-owned subsidiary of the Company, dated December 21, 1998 (as modified,
amended, renewed, extended or restated from time to time, the “Credit
Facility”) and QDRF owns one-third of the lenders’ rights under the Credit
Facility;

 

WHEREAS, pursuant to an exchange agreement dated as of November [    ],
2004 (the “Exchange Agreement”), in connection with discharge of certain
indebtedness under the Credit Facility, the Company will issue [    ]
Common Shares (as defined below) to POI Acquisition and [    ]
Common Shares to QDRF (the “Restructuring”); and

 

WHEREAS, the execution and delivery of this Agreement by the parties
hereto is a condition precedent to the consummation of the Restructuring.

 

NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein and in the Exchange Agreement, and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:

 

SECTION 1.                                Definitions. For purposes of this Agreement, the
following capitalized terms have the following meanings:

 

“Common Shares” means the shares of common stock, par value
$0.01 per share, of the Company.

 

“Exchange Act” means the United States Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder, all
as the same shall be in effect from time to time.

 

“Holders” means POI Acquisition and QDRF and each of their
respective transferees of Registrable Securities who agrees to be bound by the
provisions of this Agreement in accordance with Section 9(g) hereof.

 

“Person” means any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, governmental authority or
other entity.

 

 

“Prospectus” means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements to such
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.

 

“Registrable Securities” means all Common Shares held as of the
date hereof by the Holders (including, without limitation, any Common Shares
beneficially owned by the Holders through their equity interests in PAII) and
any Conversion Securities as defined in Section 9(f). As to any particular
Registrable Securities, such securities shall cease to be Registrable
Securities when they have been distributed by the Holder thereof to the public
pursuant to an offering registered under the Securities Act or sold to the
public through a broker, dealer or market maker in compliance with Rule 144
under the Securities Act (or any similar rule then in force) or repurchased by
the Company or any subsidiary of the Company.

 

“Registration Statement” means any registration statement of the
Company under the Securities Act that covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the related Prospectus,
any preliminary prospectus, all amendments and supplements to such registration
statement (including post-effective amendments), all exhibits and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.

 

“S-3 Eligible” means the ability of the Company to file a
Registration Statement on Form S-3 under the Securities Act.

 

“SEC” means the United States Securities and Exchange
Commission.

 

“Securities Act” means the United States Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder, all as the
same shall be in effect from time to time.

 

“Underwritten Offering” means a distribution, registered
pursuant to the Securities Act, in which securities of the Company are sold to
the public through one or more underwriters in a “firm commitment”
underwriting.

 

SECTION 2.           Demand
Registration.

 

(a)                  Requests for Registration.

 

(i)                                     Subject
to the terms and conditions set forth in this Agreement, each Holder will have
the right, by written notice delivered to the Company (a “Demand Notice”),
to request that the Company register Registrable Securities held by such
Holder(s) under and in accordance with the provisions of the Securities Act (a “Demand
Registration”); provided that a Holder may not provide a Demand Notice for
so long as such Holder is able to sell its Registrable Securities pursuant to
Rule 144(k) under the Securities Act (or any similar rule then in force).

 

2

 

(ii)                                  (x)
POI Acquisition may make up to four (4) Demand Registrations pursuant to
Section 2(a)(i) and (y) QDRF may make up to two (2) Demand Registrations
pursuant to Section 2(a)(i) (provided, that QDRF may make up to two (2)
additional Demand Registrations if and for so long as the Company is S-3
Eligible), except that no Demand Notice may be given prior to six (6) months
after the Effectiveness Date (as defined below) of the immediately preceding
Demand Registration.

 

(b)                 Filing and Effectiveness.

 

(i)                                     The
Company will file a Registration Statement relating to any Demand Registration
as promptly as reasonably practicable (but in any event within 90 days in the
case of a registration made on Form S-1, or a comparable successor form, as
applicable, or 45 days in the case of any registration made on Form S-3 or a
comparable successor form, as applicable) following the date on which the
Demand Notice is given and will use its reasonable efforts to cause the same to
be declared effective by the SEC as soon as reasonably practicable thereafter,
but in any event will use its reasonable efforts to cause the same to be
declared effective by the SEC within 150 days thereafter in the case of any
registration made on Form S-1 (or a comparable successor form) and within 90
days thereafter in the case of any registration made on Form S-3 (or a
comparable successor form) (in each such case, such date being the “Effectiveness
Date”).

 

(ii)                                  The
Company will use its reasonable best efforts to comply with all necessary
provisions of the federal securities laws in order to keep each Registration
Statement relating to a Demand Registration effective for a period of (i) in
the case of an Underwritten Offering, three (3) months from its Effectiveness
Date, and (ii) in the case of any registration made pursuant to Rule 415 under
the Securities Act, six (6) months from its Effectiveness Date, or, in any
case, such shorter period that will terminate when all Registrable Securities
covered by such Registration Statement have been sold pursuant to such
Registration Statement (in each case, such period being the “Effective
Period”), provided, however, that if any Black-Out (as defined below)
occurs during an Effectiveness Period, then such Effectiveness Period will be
tolled for the duration of the Black-Out.

 

Within ten (10) business days after receipt of such Demand Notice, the
Company will serve written notice thereof (the “Notice”) to all other
Holders and will, subject to the provisions of Sections 2(c) and 3(b)(y),
include in any registration required under this Section 2 all Registrable
Securities with respect to which the Company receives written requests for
inclusion therein within fifteen (15) days after such Notice is given to the
applicable Holder. The Holder requesting such Demand Registration will be
permitted to withdraw in good faith all or part of the Registrable Securities
from a Demand Registration at any time prior to the Effectiveness Date of such
Demand Registration, in which event the Company will promptly amend or, if applicable,
terminate or withdraw the related Registration Statement (whether or not other
Holders have elected to include Registrable Securities in such Registration
Statement) and, in the event of such a withdrawal, subject to the provisions of
Section 8, such withdrawn Registration Statement shall not be considered a
Demand Registration for purposes of Section 2(a)(ii).

 

(c)                  Priority on Demand Registration.  Notwithstanding the foregoing and subject to
the restrictions set forth in Section 3(b)(y), if the managing underwriter or
underwriters of an Underwritten Offering to which such Demand Registration
relates advises the

 

3

 

Company that the total amount
of Registrable Securities that the Holder or Holders intend to include in such
Demand Registration, together with any Piggyback Shares (as defined below)
requested to be included in such registration by any other Holder(s) pursuant
to Section 2(b)(ii) above or any other Person pursuant to similar registration rights,
is in the aggregate such as to materially and adversely affect the success of
such offering (including by affecting the price per share in the offering),
then the number of Registrable Securities to be included in such Demand
Registration will, if necessary, be reduced pro rata in accordance with Section
3(b)(y) and there will be included in such Underwritten Offering the largest
number of Registrable Securities that, in the opinion of such managing
underwriter or underwriters, can be sold without materially and adversely
affecting the success of such Underwritten Offering.

 

(d)                 Limitations on Demand Registration.  Notwithstanding anything to the contrary in
any other provision of this Agreement, the Company will not be required to
effect a Demand Registration pursuant to this Section 2:

 

(i)                                     during
the period starting with the date of filing of, and ending on the last day of
the Effectiveness Period relating to a registration statement in which such
Holder had the right to participate pursuant to Section 3 (or with respect to
which such Holder provided a Demand Notice), including a Registration Statement
in which the managing underwriter reduced the Holder’s participation pursuant
to Section 3(b); or

 

(ii)                                  if
the Company shall furnish to Holders requesting a registration statement
pursuant to this Section 2 a certificate stating that in the good faith
judgment of the Board of Directors of the Company, such registration and
offering could materially interfere with a bona
fide financing transaction of the
Company, including without limitation a primary offering of securities, or any
other material business transaction of the Company, or would require disclosure
of information, the premature disclosure of which could materially and
adversely affect the Company, in which event the Company shall have the right
to defer the filing or effectiveness of a Registration Statement for a period
of not more than one-hundred twenty (120) days after receipt of the request of
a Holder pursuant to Section 2; provided that such right to delay a request
shall be exercised by the Company not more than once in any consecutive
twelve-month period.

 

SECTION 3.           Piggyback
Registration.

 

(a)                  Right to Piggyback.  If at any time the Company proposes to file a
Registration Statement, whether or not for sale for the Company’s own account,
on a form and in a manner that would also permit registration of Registrable
Securities (other than in connection with a registration statement on Forms S-4
or S-8 or any similar or successor form), the Company shall give to Holders
holding Registrable Securities written notice of such proposed filing at least
thirty (30) days before the anticipated filing. The notice referred to in the
preceding sentence shall offer such Holders the opportunity to register such
amount of Registrable Securities as each such Holder may request (a “Piggyback
Registration”). Subject to Section 3(b), the Company will include in each
such Piggyback Registration (and any related qualification under state blue sky
laws and other compliance filings, and in any underwriting involved therein)
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within fifteen (15) days after the
written notice from the Company is given. Each such Holder will be permitted to
withdraw all or part of its Registrable

 

4

 

Securities from a Piggyback
Registration at any time prior to the effective date of such Piggyback
Registration.

 

(b)                 Priority on Piggyback Registrations.  The Company will use its reasonable best
efforts to cause the managing underwriter or underwriters of a proposed
Underwritten Offering to permit Holders holding Registrable Securities
requested to be included in the registration for such offering to include
therein all such Registrable Securities requested to be so included (such
securities, together with any other shares of the same class requested to be
included in such registration by any other Person pursuant to similar registration
rights, the “Piggyback Shares”) on the same terms and conditions as any
securities of the Company included therein (other than the indemnification by
the Holders, which will be limited as set forth in Section 7(b) hereof and provided,
that the Holders give customary covenants, representations and warranties). The
Company shall cooperate with any such Holder of Registrable Securities in order
to seek to limit any representations and warranties to, or agreements with, the
Company or the underwriters to be made by such Holder only to those
representations, warranties or agreements regarding such Holder, such Holder’s
Registrable Securities and such Holder’s intended method of distribution and
any other representations required by law. Notwithstanding the foregoing, if
the managing underwriter or underwriters of such Underwritten Offering advises
the Company to the effect that the total amount of securities that such
Holders, the Company and any other Person propose to include in such
Underwritten Offering is such as to materially and adversely affect the success
of such offering (including by affecting the price per share in the offering),
then the Company will include in such registration:

 

(x)                                   in the case of a
registration in connection with a sale of securities for the Company’s own
account, (i) first, 100% of the securities that the Company proposes to sell
for its own account, (ii) second, to the extent that the number of securities
in clause (i) above is less than the number of securities which the Company has
been advised can be sold in such offering without having the adverse effect
referred to above, the number of Piggyback Shares of each Holder and the number
of Piggyback Shares requested to be included in such offering by any other
Persons pursuant to similar registration rights, determined pro rata on the
basis of the number of Common Shares beneficially owned by each Holder
requesting registration and such other Persons requesting registration,
collectively; and

 

(y)                                 in the case of a
Demand Registration or other sale of securities on account of any Person other
than the Company, (i) first, 100% of the number of Registrable Securities
requested to be included in such Demand Registration or other sale by the
applicable Holder or other Person, as the case may be, (ii) second, to the
extent that the number of securities in clause (i) above, if applicable, is
less than the number of securities which the Company has been advised can be
sold in such offering without having the adverse effect referred to in Section
2(c) above, the number of Piggyback Shares requested to be included in such
offering by any other Holder or any other Persons pursuant to similar
registration rights, determined pro rata on the basis of the number of Common
Shares beneficially owned by each such Person requesting registration and (iii)
third, to the extent that the number of securities in clauses (i) and (ii)
above is less than the number of securities which the Company has been advised
can be sold in such offering without having the adverse effect referred to in
Section 2(c) above, the securities sought to be included by the Company in the
offering.

 

5

 

(c)                  Right to Terminate Registration.  The Company shall have the right to postpone,
terminate or withdraw any registration initiated by it under this Section 3
prior to the effectiveness of such registration whether or not the Holders have
elected to include Registrable Securities in such registration.

 

SECTION 4.           Registration
Procedures.  In connection with the
Company’s registration obligations pursuant to, and subject to the terms and
conditions contained in, Sections 2 and 3, the Company will use its reasonable
best efforts to effect such registrations to permit the sale of such Registrable
Securities in accordance with the intended method or methods of disposition
thereof, and pursuant thereto the Company will as expeditiously as reasonably
practicable, and in each case to the extent applicable:

 

(a)                  Prepare and file with the SEC a
Registration Statement or Registration Statements on any appropriate form under
the Securities Act available for the sale of the Registrable Securities by the
holders thereof in accordance with the intended method or methods of
distribution thereof, and use reasonable efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; provided, however, that before filing a Registration
Statement or Prospectus or any amendments or supplements thereto (including documents
that would be incorporated or deemed to be incorporated therein by reference)
the Company will furnish to (i) the Holders holding Registrable Securities
covered by such Registration Statement, (ii) not more than one counsel chosen
by Holders holding a majority of the Registrable Securities included in the
Demand Notice or, in the case of a Piggyback Registration, the Holders holding
a majority of the Registrable Securities being registered (“Special Counsel”) and (iii) the managing underwriters, if any,
copies of all such documents proposed to be filed, which documents will be
subject to the review of such Holders, such Special Counsel and such
underwriters, and the Company will not file any such Registration Statement or
amendment thereto or any Prospectus or any supplement thereto (excluding such
documents that, upon filing, will be incorporated or deemed to be incorporated
by reference therein) to which the Holders holding a majority of the
Registrable Securities covered by such Registration Statement or the managing
underwriter, if any, shall reasonably object.

 

(b)                 Prepare and file with the SEC such
amendments and post-effective amendments to each Registration Statement as may
be necessary to keep such Registration Statement continuously effective for the
applicable Effectiveness Period specified in Section 2; cause the related
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions then
in force) under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement during the applicable Effectiveness Period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement as so amended or in such Prospectus as so
supplemented.

 

(c)                  Notify the selling Holders and the
managing underwriters, if any, reasonably promptly, and (if requested by any
such Person) confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC or any other federal
or state governmental authority for amendments or supplements to a Registration
Statement or related Prospectus or for

 

6

 

additional information, (iii)
of the issuance by the SEC or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose, (iv) if at any time the
representations and warranties of the Company contained in any agreement
contemplated by Section 4(l) (including any underwriting agreement) cease to be
true and correct in any material respect, (v) of the receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose, (vi) of the occurrence of any event that makes any statement made in
such Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or that requires the making of any changes in a Registration Statement,
Prospectus or any such document so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading and, in the case of the Prospectus, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (vii) of the Company’s reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.

 

(d)                 Use its reasonable best efforts to
obtain the withdrawal of any order suspending the effectiveness of a
Registration Statement, or the lifting of any suspension of the qualification
(or exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction, at the earliest possible moment.

 

(e)                  Furnish to each selling Holder and
each managing underwriter, if any, without charge, at least one conformed copy
of the Registration Statement and any post-effective amendment thereto (but
excluding schedules, all documents incorporated or deemed incorporated therein
by reference and all exhibits, unless requested in writing by such Holder or
underwriter).

 

(f)                    Deliver to each selling Holder and
the underwriters, if any, without charge as many copies of the Prospectus or
Prospectuses relating to such Registrable Securities (including each
preliminary prospectus) and any amendment or supplement thereto as such persons
may reasonably request; and, subject to Section 5(e), the Company hereby
consents to the use of such Prospectus or each amendment or supplement thereto
by each of the selling Holders and the underwriters, if any, in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
or any amendment or supplement thereto.

 

(g)                 Prior to any public offering of
Registrable Securities, to register or qualify or cooperate with the selling
Holders, the underwriters, if any, and their respective counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
any seller or underwriter reasonably requests in writing; use all reasonable
efforts to keep such registration or qualification (or exemption therefrom)
effective during the period the applicable Registration Statement is required
to be kept effective and do any and all other acts or things necessary or
advisable to enable the disposition in each such jurisdiction of the
Registrable Securities covered by the applicable Registration Statement; provided,
however, that the Company will not be required to (i) qualify to do
business in any jurisdiction where it is not then so qualified, (ii) conform
its

 

7

 

capitalization or the
composition of its assets at the time to the securities or blue sky laws of
such jurisdiction, or (iii) take any action that would subject it to taxation
or service of process in any such jurisdiction where it is not then so subject.

 

(h)                 Cooperate with the selling Holders and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and
enable such Registrable Securities to be in such denominations and registered
in such names as the managing underwriters, if any, shall request at least two
business days prior to any sale of Registrable Securities to the underwriters.

 

(i)                     Upon the occurrence of any event
contemplated by Section 4(c)(ii), Section 4(c)(vi) or 4(c)(vii), prepare a
supplement or post-effective amendment to each Registration Statement or a
supplement to the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities being sold thereunder, such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

 

(j)                     Use its reasonable efforts to
cause all Registrable Securities covered by such Registration Statement to be
listed on the principal securities exchange or exchanges or qualified for
trading on the principal over the counter market, if any, on which securities
issued by the Company of the same class are then listed or qualified or, if no
such securities issued by the Company are then so listed or qualified, on such
securities exchange or over the counter market as the Company shall determine.

 

(k)                  As needed, (i) engage an appropriate
transfer agent and provide the transfer agent with printed certificates for the
Registrable Securities in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Securities.

 

(l)                     Enter into such customary
agreements (including, in the event of an Underwritten Offering, an
underwriting agreement in form, scope and substance as is customary in
underwritten offerings) and take all such other commercially reasonable and
customary actions in connection therewith (including in the event of an
Underwritten Offering, those reasonably requested by the managing underwriters)
in order to facilitate the disposition of such Registrable Securities and in
such connection, but only where an underwriting agreement is entered into in
connection with an Underwritten Offering, (i) make such representations and
warranties to the underwriters with respect to the businesses of the Company
and its subsidiaries, the Registration Statement, Prospectus and documents
incorporated by reference or deemed incorporated by reference therein, if any,
in each case, in form, substance and scope as are customarily made by issuers
to underwriters in underwritten offerings and confirm the same if and when
requested; (ii) use reasonable best efforts to obtain opinions of counsel to
the Company and updates thereof, which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters, if any,
addressed to each of the underwriters covering the matters customarily covered
in opinions requested in underwritten offerings and such other matters as may
be reasonably requested by such underwriters; (iii) use reasonable best efforts
to obtain “comfort” letters and updates thereof from the independent certified
public accountants of the Company (and, if necessary, any other certified
public

 

8

 

accountants of any subsidiary
of the Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
Registration Statement), addressed to each of the underwriters, such letters to
be in customary form and covering matters of the type customarily covered in “comfort”
letters in connection with underwritten offerings; and (iv) in the case of any
Underwritten Offering where the proposed maximum aggregate offering price for
the Registrable Securities offered thereunder exceeds $30 million, cause the
Company’s management to be made reasonably available for, and assist in, the
marketing and disposition of such Registrable Securities in the manner and to
the extent reasonably requested by the underwriters including, without
limitation, participation by management in customary road shows, investor
conferences and other similar presentations. The foregoing actions will be
taken in connection with each closing under such underwriting agreement as and
to the extent required thereunder.

 

(m)               Make available for reasonable inspection
during normal business hours by a representative of the Holders holding
Registrable Securities being sold, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling Holders or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors and employees of the Company
and its subsidiaries to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with such
Registration Statement; provided, however, that any records, information or
documents that are designated by the Company in writing as confidential at the
time of delivery of such records, information or documents will be kept
confidential by such Persons unless (i) such records, information or documents
are in the public domain or otherwise publicly available, (ii) disclosure
of such records, information or documents is required by court or
administrative order; provided, that such Holder notifies the Company of
any such requirement and cooperates with the Company in seeking a protective or
restraining order limiting such disclosure, or (iii) disclosure of such
records, information or documents, in the reasonable opinion of counsel to such
Person, after consultation with the Company, is otherwise required by law
(including, without limitation, pursuant to the requirements of the Securities
Act).

 

(n)                 Use its reasonable best efforts to
comply with all applicable rules and regulations of the SEC and make generally
available to its security holders earnings statements satisfying the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar
rule promulgated under the Securities Act) no later than 45 calendar days after
the end of any 12-month period (or 90 calendar days after the end of any
12-month period if such period is a fiscal year) (i) commencing at the end of any
fiscal quarter in which Registrable Securities are sold to underwriters in a
firm commitment or best efforts Underwritten Offering, or (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company, after the effective date of a Registration
Statement, which statements shall cover such 12-month period.

 

SECTION 5.           Certain
Covenants.  The Company’s
registration obligations to a Holder shall be conditioned upon compliance with
the following:

 

(a)                  such Holder shall cooperate with the
Company in connection with the preparation of the Registration Statement, and
such Holder will provide to the Company, in writing, for use in the
Registration Statement, all information regarding such Holder and such other
information as may be necessary to enable the Company to prepare the
Registration

 

9

 

Statement and Prospectus
covering the Registrable Securities and to maintain the currency and
effectiveness thereof;

 

(b)                 such Holder shall enter into such
agreements with the Company and any underwriter, broker-dealer or similar
securities industry professional containing representations, warranties,
indemnities and agreements as are in each case customarily entered into and
made by selling stockholders, and will cause its counsel to give any legal
opinions customarily given, in secondary distributions under similar
circumstances;

 

(c)                  during such time as such Holder may
be engaged in a distribution of the Registrable Securities, such Holder will
use its best efforts to comply with all laws applicable to such distribution,
including, but not limited to Regulation M promulgated under the Exchange Act,
and pursuant thereto will, among other things, to the extent applicable: (i)
not engage in any stabilization activity in connection with the securities of
the Company in contravention of such rules; (ii) distribute the Registrable
Securities owned by such Holder solely in the manner described in the
Registration Statement; (iii) cause to be furnished to each underwriter, agent
or broker-dealer to or through whom the Registrable Securities owned by such
Holder may be offered, or to the offeree if an offer is made directly by the
Holder, such copies of the Prospectus (as amended and supplemented to such
date) and documents incorporated by reference therein as may be required by
such underwriter, agent, broker-dealer or offeree; and (iv) not bid for or
purchase any securities of the Company or attempt to induce any person to purchase
any securities of the Company other than as permitted under the Exchange Act;

 

(d)                 upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section
4(c)(ii), 4(c)(iii), 4(c)(v), 4(c)(vi) or 4(c)(vii) (“Suspension Notice”),
such Holder will forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus (a “Black-Out”)
until such Holder’s receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 4(i), or until it is advised in writing (the
“Advice”) by the Company that the use of the applicable Prospectus may
be resumed, and such Holder has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus. Except as expressly provided herein, there shall
be no limitation with regard to the number of Suspension Notices that the
Company is entitled to give hereunder; provided, however, that in
each such event the Company will use its reasonable best efforts to promptly
cure the event giving rise to the Suspension Notice.

 

SECTION 6.           Registration
Expenses.  Subject to the penultimate
sentence of Section 8, all expenses in connection with any Registration Statement,
any qualification or compliance with federal or state laws required in
connection therewith, and the distribution of the Registrable Securities shall,
as between the Holders and the Company, be borne as follows:

 

(a)                  the Company shall pay and be responsible
for (i) all registration and filing fees (including fees and expenses for
compliance with federal or state securities laws or state “blue sky” laws),
(ii) printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities in a form eligible for deposit with The
Depository Trust Company and of printing a reasonable number of prospectuses if
the printing of such prospectuses is requested by the Holders holding a
majority of the Registrable Securities included in any Registration Statement),
(iii) messenger, telephone and delivery expenses incurred by the Company, (iv)
fees and disbursements of counsel for the Company incurred by

 

10

 

the Company, (v) fees and disbursements
of all independent certified public accountants referred to in Section
4(l)(iii) (including the expenses of any special audit and “comfort” letter
required by or incident to such performance) incurred by the Company, (vi)
reasonable and documented fees and out-of-pocket expenses of one Special
Counsel retained by the Holders in
connection with the registration and sale of their Registrable Securities
(which counsel will be chosen by Holders holding a majority of the Registrable
Securities included in a Demand Notice or, in the case of a Piggyback
Registration, the Holders holding a majority of the Registrable Securities
being registered), and (vii) reasonable and documented underwriter fees and
out-of-pocket expenses. In addition, the Company will pay internal expenses
(including without limitation all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the securities
to be registered on any securities exchange on which securities of the same
class issued by the Company are then listed or for admission of any securities
for quotation and an inter-dealer quotation system, as applied and the fees and
expenses of any Person, including special experts, retained by the Company.

 

(b)                 the Holders shall pay (i) any
underwriting discount or selling commission with respect to any sale of
Registrable Securities held by them pursuant to this Agreement, (ii) any taxes
of any kind (including, without limitation, transfer taxes) with respect to any
disposition, sale or transfer of Registrable Securities and (iii) any legal,
accounting and other expenses incurred by them, except as provided above with
respect to Special Counsel, in connection with any Registration Statement.

 

SECTION 7.           Indemnification.

 

(a)                  Indemnification by the Company.  The Company will indemnify and hold harmless,
to the fullest extent permitted by law, each Holder holding Registrable
Securities registered pursuant to this Agreement, the officers, directors,
partners, agents and employees of each of them, each Person who controls such a
Holder (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) and the officers, directors, partners, agents and employees
of any such controlling person (collectively, the “Holder Indemnified
Parties”), from and against all losses, claims, damages, liabilities, costs
(including without limitation the costs of investigation and attorneys’ fees) and
expenses (collectively, “Losses”), arising out of or based upon any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or in any amendment or supplement thereto or
in any preliminary prospectus, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or any violation by the Company of
any federal, state or common law rule or regulation applicable to the Company
and relating to action required of or inaction by the Company in connection
with any such registration; provided, however, that the Company
will not indemnify or hold harmless any Holder Indemnified Party from or
against any such Losses (i) that arise out of or are based upon, in the case of
a non-Underwritten Offering, any failure by such Holder to give any purchaser
of Registrable Securities at or prior to the written confirmation of such sale,
a copy of the most recent Prospectus or (ii) if the untrue statement, omission
or allegation thereof upon which such Losses are based (x) was made in reliance
upon and in conformity with the information provided in writing by or on behalf
of any Holder Indemnified Party specifically for use or inclusion in the
Registration Statement or any Prospectus, or (y) was made in any Prospectus
used after such time as the Company advised such Holder that the filing of a
post-effective amendment or

 

11

 

supplement thereto was
required, except the Prospectus as so amended or supplemented, or (z) was made
in any Prospectus used after such time as the obligation of the Company
hereunder to keep the Registration Statement effective and current has expired
or been suspended hereunder.

 

(b)                 Indemnification by Holders.  In connection with any Registration Statement
in which a Holder is participating, such Holder will furnish to the Company in
writing such information as the Company reasonably requests for use in
connection with any Registration Statement, Prospectus or preliminary
prospectus and will, severally but not jointly, indemnify and hold harmless, to
the fullest extent permitted by law, the Company, its directors and officers,
agents and employees, each person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, agents or employees of such controlling persons
(collectively, the “Company Indemnified Parties”), from and against all
Losses arising out of or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
Prospectus or in any amendment or supplement thereto or in any preliminary
prospectus or arising out of or based upon, any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, if the statement or omission was made in reliance
upon and in conformity with the information provided in writing by or on behalf
of such Holder or any person who controls such Holder specifically for use or
inclusion in the Registration Statement or any Prospectus, (ii) the use of any
Prospectus after such time as the Company has advised such Holder that the
filing of a post-effective amendment or supplement thereto is required, except
the Prospectus as so amended or supplemented, (iii) the use of any Prospectus
after such time as the obligation of the Company hereunder to keep the
Registration Statement effective and current has expired or been suspended
hereunder, or (iv) in the case of a non-Underwritten Offering, any failure by
such Holder to give any purchaser of Registrable Securities at or prior to the
written confirmation of such sale, a copy of the most recent Prospectus. In no
event will the liability of any selling Holder hereunder be greater in amount
than the dollar amount of the net proceeds received by such Holder upon the
sale of the Registrable Securities giving rise to such indemnification
obligation.

 

(c)                  Conduct of Indemnification
Proceedings.  If any person shall
become entitled to indemnity hereunder (an “indemnified party”), such
indemnified party shall give prompt notice to the party from which such
indemnity is sought (the “indemnifying party”) of any claim or of the
commencement of any action or proceeding with respect to which such indemnified
party seeks indemnification or contribution pursuant hereto; provided, however,
that the failure to so notify the indemnifying party will not relieve the
indemnifying party from any obligation or liability except to the extent that
the indemnifying party has been prejudiced materially by such failure. All
reasonable and documented fees and expenses (including any reasonable fees and
expenses incurred in connection with investigating or preparing to defend such
action or proceeding) will be paid to the indemnified party (provided
appropriate documentation for such expenses is also submitted with such
notice), as incurred, within five calendar days of written notice thereof to
the indemnifying party. The indemnifying party will not consent to entry of any
judgment or enter into any settlement or otherwise seek to terminate any action
or proceeding in which any indemnified party is or could be a party and as to
which indemnification or contribution could be sought by such indemnified party
under this Section 7, unless such judgment, settlement or other termination
includes as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release, in form and substance
reasonably satisfactory to the indemnified party, from all liability in respect
of such

 

12

 

claim or litigation for which
such indemnified party would be entitled to indemnification hereunder.

 

(d)                 Contribution.  If the indemnification provided for in this
Section 7 is unavailable to an indemnified party under Section 7(a) or 7(b) in
respect of any Losses or is insufficient to hold such indemnified party
harmless, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, will, severally but not jointly, contribute to the amount
paid or payable by such indemnified party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or indemnifying parties, on the one hand, and such indemnified party, on
the other hand, in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such indemnifying party or indemnifying parties, on the
one hand, and such indemnified party, on the other hand, will be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or related to
information supplied by, such indemnifying party or indemnified party, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses will be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
action or proceeding.

 

The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro  rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 7(d), an indemnifying
party that is a selling Holder will not be required to contribute any amount in
excess of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such contribution obligation over the
amount of any damages that such indemnifying party has otherwise been required
to pay pursuant to Section 7(b) by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.

 

The indemnity, contribution and expense reimbursement obligations of
the Company hereunder will be in addition to any liability the Company may
otherwise have hereunder or otherwise. The provisions of this Section 7 will
survive any investigation made by or on behalf of such indemnified party and
shall survive the transfer of such securities by such seller or any termination
of this Agreement.

 

SECTION 8.           Underwritten
Registrations.  If any of the
Registrable Securities included in any Demand Registration are to be sold in an
Underwritten Offering, the Holders holding a majority of the Registrable
Securities included in the Demand Notice may select an investment banker or
investment bankers and manager or managers to manage the Underwritten Offering,
provided that such investment banker or bankers and managers is (are)
reasonably acceptable to the Company. If any Piggyback Registration is an
Underwritten Offering, the Company will have the exclusive right to select the
investment banker or investment bankers and managers to administer the
offering. If requested by the underwriters for any Underwritten Offering in
which a Holder participates as selling shareholder, the Company shall enter
into a customary underwriting agreement with the underwriters. Such
underwriting agreement shall be

 

13

 

reasonably satisfactory in form
and substance to the Holders if any such Holder is participating as a selling
Holder in such Underwritten Offering and shall contain such representations and
warranties by, and such other agreements on the part of, the Company and such
other terms as are generally prevailing in agreements of that type, including,
without limitation, indemnities and contribution agreements on substantially
the same terms as those contained herein; provided, however, that
the Company shall not be required to make any representations or warranties to
any Holder with respect to written information specifically provided by a
selling Holder for inclusion in the registration statement. Such underwriting
agreement shall also contain such representations and warranties by the
participating Holders with respect to title and ownership of shares as are
customary in agreements of that type. Any Holder participating in an
Underwritten Offering may, before any Registration Statement becomes effective,
withdraw his or its Registrable Securities from inclusion therein, should the
terms of sale not be satisfactory to such Holder, however, if the Holder
who initiated the Underwritten Offering pursuant to the exercise of its rights
under Section 2 so withdraws, such registration shall be deemed to have
occurred for the purposes of Section 2(a)(ii), unless such Holder pays within
20 days after any such withdrawal, all of the out-of-pocket expenses of the
Company incurred in connection with such registration. The Company and the
Holders agree that, in connection with any Underwritten Offering hereunder,
they shall agree to any restrictions required by the underwriters on the sale
of Common Shares or other securities by such party after the completion of the
Underwritten Offering; provided, however, that the period of such restrictions
shall not exceed 90 days in connection with any offering.

 

SECTION 9.           Miscellaneous.

 

(a)                  Remedies.  In the event of a breach by a party of its
obligations under this Agreement, each other party, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. Each
party agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any provision of this Agreement
and hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it will waive the defense that a remedy
at law would be adequate.

 

(b)                 Rule 144.  The Company covenants that (i) so long as it
remains subject to the reporting provisions of the Exchange Act, it will use
its best efforts to timely file the reports required to be filed by it under
the Securities Act or the Exchange Act (including, but not limited to, the
reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144 under the Securities Act), and (ii) will take
such further action as any Holder of Registrable Securities may reasonably
request in writing, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (A) Rule 144 under
the Securities Act, as such Rule may be amended from time to time, or
(B) any similar rule or regulation hereafter adopted by the SEC. Upon the
request of any Holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.

 

(c)                  Nominees for Beneficial Owners.  If Registrable Securities are held by a
nominee for the beneficial owner thereof, the beneficial owner thereof may, at
its option, be treated as the Holder of such Registrable Securities for
purposes of any request or other action by any Holder or Holders of Registrable
Securities pursuant to this Agreement (or any

 

14

 

determination of any number or
percentage of shares constituting Registrable Securities held by any Holder or
Holders of Registrable Securities contemplated by this Agreement), provided
that the Company shall have received assurances reasonably satisfactory to it
of such beneficial ownership.

 

(d)                 Amendments and Waivers.  The provisions of this Agreement may not be
amended, modified or supplemented without the prior written consent of (i) the
Company, (ii) Holders holding in excess of 50% of the Registrable Securities
beneficially held by POI Acquisition and its transferees and (iii) Holders
holding in excess of 50% of the Registrable Securities beneficially held by
QDRF and its transferees. No amendment that materially adversely affects any
particular Holder may be effected to this Agreement without the consent of such
Holder.

 

(e)                  Notices.  All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified; (ii) when sent by confirmed facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day; (iii) upon delivery if sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) upon delivery if deposited
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):

 

If to the Company to:

 

Protection One, Inc

1035 N. 3rd Street, Suite 101

Lawrence, Kansas 66044

Telephone:  785-575-1707

Facsimile:  785-575-1711

Attention: Darius G. Nevin

 

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

 

Kirkland & Ellis LLP

200 East Randolph Drive

Chicago, Illinois 60601

Telephone:  312-861-2000

Facsimile:   312-861-2200

Attention:  John M. Jennings

 

If to POI Acquisition:

 

c/o Quadrangle Group LLC

375 Park Avenue

New York, New York 10152

Telephone: 212-418-1700

Facsimile: 212-418-1701

Attention: David Tanner

 

15

 

If to QDRF:

 

c/o Quadrangle Group LLC

375 Park Avenue

New York, New York 10152

Telephone: 212-418-1700

Facsimile: 212-418-1701

Attention: Michael Weinstock

 

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

 

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017-3790

Telephone: 212-455-2000

Facsimile:  212-455-2502

Attention:  Alan M. Klein

 

and

 

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, New York 10019-6099

Telephone: 212-728-8000

Facsimile: 212-728-8111

Attention: Michael Kelly

 

or to such other address or addresses as shall be designated in
writing. All notices shall be effective when received.

 

(f)                    Merger, Amalgamation or
Consolidation of the Company.  If the
Company is a party to any merger, amalgamation, or consolidation pursuant to
which the Registrable Securities are converted into or exchanged for securities
or the right to receive securities of any other person (“Conversion
Securities”), the issuer of such Conversion Securities shall assume (in a
writing delivered to all Holders) all obligations of the Company hereunder. The
Company will not effect any merger, amalgamation, or consolidation described in
the immediately preceding sentence unless the issuer of the Conversion
Securities complies with this Section 9(f).

(g)                 Successors and Assigns.  Subject to the terms and conditions of the
Stockholders Agreement dated as of the date hereof among QDRF, POI Acquisition
and the Company (the “Stockholders Agreement”), any lawful transferee
(other than pursuant to an offering registered under the Securities Act or a
sale to the public through a broker, dealer or market maker in compliance with
Rule 144 under the Securities Act (or any similar rule then in force)) of all
or a portion of the Registrable Securities shall become a Holder hereunder to
the extent it agrees in writing to be bound by all of the provisions applicable
hereunder to the transferring Holder (such acknowledgment being evidenced by
execution and delivery to the Company of a Counterpart and Acknowledgment
substantially in the form of Exhibit A).

 

16

 

Subject to the requirements of
this Section 9(g), this Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of the parties hereto.

 

(h)                 PAII.  QDRF and POI Acquisition agree to cause PAII
to comply with the provisions of this Agreement as if it were a Holder and a
party hereto.

 

(i)                     Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

 

(j)                     Titles and Subtitles.  The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

 

(k)                  Governing Law.  This Agreement shall be governed in all
respects by the laws of the State of New York without giving effect to
conflicts of law principles.

 

(l)                     Separability.  In case any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

 

(m)               Entire Agreement.  This Agreement and the other documents
delivered pursuant hereto and the Stockholders Agreement constitute the full and entire
understanding and agreement among the parties with regard to the subjects
thereto and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically
set forth herein and therein.

 

(n)                 No Inconsistent Agreements.  The rights granted to the holders of
Registrable Securities hereunder do not in any way conflict with and are not
inconsistent with any other agreements to which the Company is a party or by
which it is bound. Without the prior written consent of POI Acquisition and
QDRF (in each case, for so long as they hold Registrable Securities), neither
the Company nor any Holder will, on or after the date of this Agreement, enter
into any agreement with respect to its securities which conflicts with the
provisions hereof, other than any lock-up agreement with the underwriters in
connection with any registered offering effected hereunder, pursuant to which
the Company shall agree not to register for sale, and the Company shall agree
not to sell or otherwise dispose of, Common Shares or any securities
convertible into or exercisable or exchangeable for Common Shares, for a
specified period following the registered offering.

 

[Signature page follows]

 

17

 

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

 

 

	
   

  	
  PROTECTION ONE, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  POI ACQUISITION LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  QUADRANGLE MASTER FUNDING LTD

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

18

 

EXHIBIT A

 

REGISTRATION RIGHTS AGREEMENT

COUNTERPART AND ACKNOWLEDGMENT

 

	
  TO:

  	
  Protection One, Inc. (the “Company”)

  
	
  RE:

  	
  The Registration Rights Agreement (the “Agreement”) dated as of           ,
  2005, by and among the Company and the Holders (as defined in the Agreement)

  

 

The undersigned hereby agrees to be bound by the terms of the Agreement
as a party to the Agreement, and shall be entitled to all benefits of the
Holders (as defined in the Agreement) and shall be subject to all obligations
and restrictions of the Holders pursuant to the Agreement, as fully and
effectively as though the undersigned had executed a counterpart of the
Agreement together with the other parties to the Agreement. The undersigned
hereby acknowledges having received and reviewed a copy of the Agreement.

 

DATED this           
day of                     ,
          

 

	
   

  	
  By:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Number of Registrable Securities:

  

 

ANNEX V

 

SETTLEMENT AGREEMENT

Dated as of November 12, 2004

 

This Settlement Agreement is made and entered into this 12th
day of November, 2004, by and among Westar Energy, Inc., a Kansas corporation (“Westar”), Protection One, Inc., a Delaware
corporation (“POI”), POI
Acquisition, L.L.C., a Delaware limited liability company (“POIA”), and POI Acquisition I, Inc., a
Delaware corporation and a wholly-owned subsidiary of POIA (“POIA Inc.”), (each of Westar, POI, POIA and
POIA Inc., a “Party” and
collectively, the “Parties”).

 

RECITALS

 

A.                                   Pursuant
to the Purchase Agreement dated December 23, 2003 between POIA, Westar
Industries, Inc., a wholly-owned subsidiary of Westar (“WII”), and Westar (as amended, the “Purchase Agreement”), POIA, through POIA
Inc., purchased an aggregate of 85,291,497 shares of common stock, par value
$0.01, of POI from WII, and assumed all of WII’s rights and obligations under
the Revolving Credit Agreement dated as of December 21, 1998 (“Credit Facility”), by and among WII, POI as
guarantor and Protection One Alarm Monitoring, Inc., a Delaware corporation and
wholly-owned subsidiary of POI (“POAMI”);

 

B.                                     Under
Sections 8.05 and 11.07 of the Purchase Agreement, POIA has agreed to pay to
Westar a portion of certain tax sharing payments and to pay to Westar a portion
of the Credit Facility Recovery Value that exceeds the Threshold Amount (as
each of these are defined in the Purchase Agreement);

 

C.                                     POIA
and Westar desire to (i) achieve a final settlement of all outstanding and
potential claims under Sections 8.05 and 11.07 of the Purchase Agreement and
(ii) settle, by means of this Settlement Agreement claims, to the extent
explicitly provided herein, between them relating to Sections 8.02 and 8.07 of
the Purchase Agreement but excluding, without limitation, any claims between
them relating to or arising under or by virtue of Sections 8.03, 8.04, 8.06 and
8.08 of the Purchase Agreement;

 

D.                                    Westar
and POI are parties to a Tax Sharing Agreement dated as of November 24,
1997 (the “Tax Sharing Agreement”)
which made available to POI a “Tax Sharing and Allocation Policy” adopted by
Westar as of January 1, 1994; and

 

E.                                      Westar
and POI desire to terminate the Tax Sharing Agreement and to settle, by means
of this Settlement Agreement, all claims between them relating to and arising
under or by virtue of the Tax Sharing Agreement and, in addition, to enter into
mutual general releases.

 

Now, therefore, in consideration of the mutual promises herein
contained, the Parties agree as follows:

 

 

ARTICLE 1.

 

DEFINITIONS

 

Section 1.01.  Definitions.

 

(a)                                  The
following terms, as used herein, have the following meanings:

 

“338(h)(10) Election”
means an election under section 338(h)(10) of the Code, and any similar
election under state or local law made in connection with the sale of the stock
of POI to POIA, Inc., pursuant to the Purchase Agreement.

 

“Affiliate” means, with
respect to any Person, any other Person directly or indirectly controlling,
controlled by, or under common control with such other Person.

 

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

 

“Closing Date” means the
date on which the closing under the Purchase Agreement occurred.

 

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

 

“Lien” means, with respect
to any property or asset, any mortgage, lien, pledge, charge, security
interest, option, warrant, purchase right, claim or encumbrance of any nature
whatsoever in respect of such property or asset.

 

“Person” means an
individual, corporation, partnership, limited liability company, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.

 

“Pre-Closing Tax Period”
means any Tax period or portion thereof, ending on or before the Closing Date.

 

“Settlement Date” means
the date of the Settlement Closing.

 

“Tax” means any tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any governmental authority responsible for the imposition of any
such tax.

 

(b)                                 Each
of the following terms is defined in the Section set forth opposite such term:

 

	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  Credit
  Facility

  	
   

  	
  Recitals

  
	
  Indenture

  	
   

  	
  2.02

  
	
  Notes

  	
   

  	
  2.01

  
	
  POAMI

  	
   

  	
  Recitals

  
	
  POI Release

  	
   

  	
  4.02

  

 

2

 

	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  POIA Cash
  Payment

  	
   

  	
  2.01

  
	
  POIA Release

  	
   

  	
  4.03

  
	
  Purchase
  Agreement

  	
   

  	
  Recitals

  
	
  Purchase
  Price Allocation

  	
   

  	
  Appendix I

  
	
  Tax Sharing
  Agreement

  	
   

  	
  Recitals

  
	
  Settlement
  Closing

  	
   

  	
  2.02

  
	
  Westar Cash
  Payment

  	
   

  	
  2.01

  
	
  Westar
  Release

  	
   

  	
  4.01

  
	
  WII

  	
   

  	
  Recitals

  

 

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

 

ARTICLE 2

 

SETTLEMENT OF CLAIMS; SETTLEMENT CLOSING.

 

Section 2.01.  Settlement of Claims.

 

The Parties agree that: 

 

(a)                                  Westar
shall pay to POI an aggregate of $73,000,000, which will represent payment in
full of all amounts due from Westar or any Westar Affiliate to POI under the
Tax Sharing Agreement.  This amount shall
consist of $26,640,000 in aggregate principal amount of POAMI’s 73/8%
Senior Notes Due 2005 (the “Notes”),
which shall be valued at their face amount plus accrued and unpaid interest
thereon up to and including the Settlement Date (such accrued and unpaid
interest is $474,802.50 at November 12, 2004), and the remainder in cash
(the “Westar Cash Payment”).

 

3

 

(b)                                 POIA
shall pay to Westar an aggregate of $32,500,000 in cash (the “POIA Cash Payment”), which will represent
payment in full of all amounts due to Westar under Sections 8.05 and 11.07 of the
Purchase Agreement.

 

Section 2.02.  Settlement Closing.

 

(a)                                  The
closing of the settlement of claims (the “Settlement
Closing”) between the Parties shall take place at the offices of
Westar, 818 S. Kansas Avenue, Topeka, Kansas 66612, simultaneously
with the execution and delivery of this Settlement Agreement, on November 12,
2004.

 

(b)                                 At
the Settlement Closing:

 

(i)                           Westar
shall deliver to POI:

 

(A)                    the
Notes by providing the Depositary, as such entity is defined in the Indenture
dated August 17, 1998 (the “Indenture”),
an irrevocable instruction to transfer to POI’s account (or the account of POI’s
transferee if such entity is identified in writing to Westar prior to the
Settlement Closing) the relevant beneficial interests in the Global Note in
accordance with the provisions of the Indenture and the Applicable Procedures
thereunder and thereafter cooperating with POI to provide notice of such
transfer to POAMI so that the transfer may be recorded in the register kept at
the Trustee’s Corporate Trust Office, as described in Section 2.03 of the
Indenture.

 

(B)                      the
Westar Cash Payment in immediately available funds by wire transfer to an
account designated by POI in writing prior to the Settlement Closing.

 

(ii)                                  POIA
shall deliver to Westar the POIA Cash Payment in immediately available funds by
wire transfer to an account designated by Westar in writing prior to the
Settlement Closing.

 

(c)                                  Westar’s
delivery of the Notes and the Westar Cash Payment to POI and POIA’s delivery of
the POIA Cash Payment to Westar, when completed pursuant to Section 2.02(b),
shall be deemed to have occurred simultaneously, and no delivery shall be
deemed to have occurred unless all deliveries shall be made.

 

(d)                                 Simultaneously
with the deemed completion of the deliveries described in Section 2.02(c)
above, the provisions of Articles 3 and 4 below shall become effective.

 

(e)                                  Each
of POIA and Westar agree that the transactions contemplated by this Settlement
Agreement were effected in full compliance with the requirements of Section
7.06 of the Purchase Agreement.

 

(f)                                    For
the avoidance of doubt, Sections 8.05 and 11.07 of the Purchase Agreement shall
have no effect after the Settlement Closing.

 

4

 

(g)                                 For
tax purposes, the amounts described in (i) Section 2.01(a) and Section 3.02(c)
shall be treated as a contribution to capital and (ii) Section 2.01(b) shall be
treated as an adjustment to the purchase price in the manner described in
Sections 8.05(c) and 11.07(b) of the Purchase Agreement.

 

ARTICLE 3

 

TAX MATTERS.

 

Section 3.01.  Termination of Tax Sharing Agreement.  Westar and POI agree that as of the Closing
Date, the Tax Sharing Agreement shall be terminated and neither party thereto
shall have any further rights or obligations thereunder with respect to any Tax
period, including as a result of an audit or other adjustment of a return filed
with respect to any Pre-Closing Tax Period. 
All obligations under the Tax Sharing Agreement shall be deemed to have
been satisfied in full in consideration for this Settlement Agreement and the
payments to be made pursuant to this Settlement Agreement and Section 8.07 of
the Purchase Agreement shall cease to have any effect after the Settlement
Closing.  For the avoidance of doubt,
this Section 3.01 shall have no effect on the Parties’ indemnification rights
and obligations under Sections 8.03 and 8.04 of the Purchase Agreement.

 

Section 3.02.  Section 338(h)(10) Election.

 

(a)                                  Westar
and POIA Inc. agree to join in making 338(h)(10) Elections for POI and each
subsidiary of POI listed on Appendix I hereto.  Such 338(h)(10) Elections shall be made in
accordance with the Purchase Price Allocation (as set forth in Appendix I) and
consistent with Treasury Regulations promulgated under Section 338(h)(10) of
the Code.  Westar and POIA Inc. agree to
act in accordance with the Purchase Price Allocation in the preparation, filing
and audit of any Tax return.

 

(b)                                 For
the avoidance of doubt, (i) other than as explicitly provided in Section
3.02(a), Section 8.04(a)(ii) of the Purchase Agreement shall survive and remain
in full force and effect after the Settlement Closing and (ii) Westar shall not
be obligated to make any tax sharing payments to POI in respect of losses
generated, or treated as generated, by POI in connection with the 338(h)(10)
Election, except as set forth in Section 3.02(c) below.

 

(c)                                  (i)  Westar agrees that if it (or any member of a
consolidated or combined filing that includes Westar) claims and receives, with
respect to any taxable period beginning after December 31, 2004, any Tax
benefits attributable to any net operating loss carryforward arising out of the
deemed sale of the assets of POI and its subsidiaries as a result of the
338(h)(10) Election, it shall pay POI an amount in cash equal to 50% of the
value of such benefits (net of any adjustments made in response to audits or
inquiries by Tax authorities and less any reasonable out-of-pocket costs
incurred after the Settlement Date, including the fees of outside attorneys and
other third party professionals, associated with obtaining such benefits,
including the costs of responding to audits or inquiries by Tax authorities).  Westar
shall determine whether to claim any such net operating loss carryforward in
good faith.

 

5

 

(ii)  If Westar claims a Tax
benefit described in clause (i) of this Section 3.02(c), it shall,
within 30 days of filing a return reflecting such Tax benefit, deliver to
POI a certificate executed by the CFO of Westar stating the amount of the Tax
benefit claimed (which shall include appropriate detail regarding the basis for
the calculation) and the status of any audit or inquiry by a Taxing authority,
if any, with respect to such net operating loss carryforward for that taxable
year or any prior taxable year.

 

(iii)  Payment(s) required under
this Section 3.02(c) shall be due within 30 days after the expiration of the
statute of limitations with respect to the return filed for the taxable period
for which the relevant benefit is claimed, together with interest
thereon.  Interest will accrue during a particular calendar quarter (or
portion thereof) at the rate per annum equal to the rate reported in the Wall
Street Journal as the “Prime Rate” in effect on the last Business Day of the
immediately preceding calendar quarter, minus 0.75%, and shall be (x)
calculated from the due date of such return to the date of payment, (y)
compounded annually and (z) computed on the basis of a 365 day year.  Westar shall determine the amount and timing
of any payment under this Section 3.02(c) in good faith, and at the time
of making any such payment, shall deliver to POI a certificate executed by
Westar’s CEO and CFO setting forth such determination and appropriate detail
regarding the basis for the calculation and the timing of the payment.  Westar shall make available and allow POI to
review all documents relevant to such determination, including without
limitation Tax returns, audit reports issued by Tax authorities and
documentation of out-of-pocket costs.

 

(iv)  Neither POIA nor POI nor
any of their Affiliates shall be entitled to participate in the preparation or
audit (or any related inquiry by a Taxing authority) of any Tax return of
Westar.

 

(d)                                 Sections 8.02(a)
and 8.02(b) of the Purchase Agreement shall cease to have any effect after the
Settlement Closing.

 

Section 3.03.  Amended Returns.  Westar on the one hand and POI on the other
hand, agree that, without the prior written consent of the other (which consent
shall not be unreasonably withheld), none of them nor any of their
subsidiaries, except to the extent required by law, will file any amended
return, file any claim for refund or take any other action relating to a
Pre-Closing Tax Period that could reasonably be expected to have an adverse
impact on the other.

 

Section 3.04.  Refunds. 
POI agrees promptly to pay to Westar all refunds of Taxes (other than as
provided in Section 3.05 below) and interest thereon received by POI or any of
its subsidiaries attributable to any Pre-Closing Tax Period.

 

Section 3.05.  Carrybacks.  POI agrees not to carry back to any
Pre-Closing Tax Period any losses, credits or similar items arising in a
taxable period beginning after the Closing Date without the prior written
consent of Westar, provided; however, that to the extent the carryback
of Tax losses, credits or similar items is required by law, POI shall be
entitled to carry back to a Pre-Closing Tax Period any such Tax losses, credits
or similar items and shall be entitled to any refund arising therefrom
(including any interest received thereon).

 

6

 

Section 3.06.  Cooperation.  Westar on the one hand and POI on the other
hand agree to furnish or cause to be furnished to each other, upon request, as
promptly as practicable, such information (including access to books and
records) and assistance relating to POI as is reasonably necessary for the
filing of any return, for the preparation of any audit, and for the prosecution
or defense of any claim, suit or proceeding relating to any proposed
adjustment.  POI agrees to retain or
cause to be retained all books and records relating to Pre-Closing Tax Periods
pertinent to POI until the applicable period for assessment under applicable
law (giving effect to any and all extensions or waivers) has expired, and to
abide by or cause the abidance with all record retention agreements entered
into by POI with any taxing authority. 
POI agrees to give Westar reasonable notice prior to transferring,
discarding or destroying any such books and records relating to Tax matters
and, if Westar so requests, will allow Westar to take possession of such books
and records.  Westar and POI shall
cooperate with each other in the conduct of any audit or other proceedings in
relation to Tax matters involving POI and each shall execute and deliver such
powers of attorney and other documents as are reasonably necessary to carry out
the intent of this subsection.

 

Section 3.07.  Unless explicitly
provided otherwise herein, Sections 8.02(c), 8.03, 8.04, 8.06 and 8.08 shall
survive and remain in full force and effect after the Settlement Closing.

 

ARTICLE 4

 

MUTUAL GENERAL RELEASES.

 

Section 4.01.  Release by Westar of POI.

 

(a)                                  Effective
as of the Settlement Closing, Westar, on behalf of itself and Affiliates under
its control, and its and their respective successors or assigns, release and
forever discharge (“Westar Release”)
POI and its subsidiaries and its and their respective directors, officers,
employees, attorneys, and agents acting in such capacities, and all their
predecessors, successors, heirs, executors, administrators, representatives,
and assigns, acting in such capacities, of and from all manner of action and
actions, cause and causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
executions, claims and demands and defenses whatsoever, including attorney’s
fees, costs, and interest, in law or in equity, whether known or unknown which
Westar or any of its successors or assigns ever had, now has, or hereafter can,
may or shall have against any such parties, from the beginning of the world to
the Settlement Date.  The Parties to this
Agreement intend that this release be construed broadly.

 

(b)                                 Westar
further acknowledges that it is represented by counsel in connection with this
Settlement Agreement, that it has in fact consulted with counsel concerning
this Settlement Agreement, and that after such consultations it fully
understands the terms of this Settlement Agreement and executes it freely and
voluntarily, intending fully to be bound hereby.

 

7

 

Section 4.02.  Release by POI of Westar.

 

(a)                                  Effective
as of the Settlement Closing, POI, on behalf of itself and Affiliates under its
control, and its and their respective successors or assigns, release and
forever discharge (“POI Release”)
Westar and its subsidiaries and its and their respective directors, officers,
employees, attorneys, and agents acting in such capacities, and all their
predecessors, successors, heirs, executors, administrators, representatives,
and assigns, acting in such capacities, of and from all manner of action and
actions, cause and causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
executions, claims and demands and defenses whatsoever, including attorney’s
fees, costs, and interest, in law or in equity, whether known or unknown which
POI or any of its successors or assigns ever had, now has, or hereafter can,
may or shall have against any such parties, from the beginning of the world to
the Settlement Date.  The Parties to this
Agreement intend that this release be construed broadly.

 

(b)                                 POI
further acknowledges that it is represented by counsel in connection with this
Settlement Agreement, that it has in fact consulted with counsel concerning
this Settlement Agreement, and that after such consultations it fully
understands the terms of this Settlement Agreement and executes it freely and
voluntarily, intending fully to be bound hereby.

 

Section 4.03.  Exceptions to Release.  Notwithstanding anything to the contrary
contained herein, the provisions of this Article 4 shall have no effect on
(i) the rights and remedies available to the Westar and POIA under the
Purchase Agreement, (ii) the representations, warranties, obligations or
rights of the Parties under this Settlement Agreement, or (iii) the
Service Agreement, by and between Westar and POI dated as of April 1, 1999
(as renewed, extended, modified and amended to date) (the “Service Agreement”) and the related
obligations of POIA and Westar under Section 7.04 of the Purchase
Agreement, or (iv) any alarm monitoring or other service agreements
(including card access control, CCTV and fire and security monitoring services)
among Westar or its subsidiaries, on the one hand, and POI or its subsidiaries,
on the other hand, in effect on the date of this Agreement; provided, however,
that nothing in this Article 4 shall be held or implied to waive, affect
or otherwise modify any rights, claims or defenses that POI, Westar or their
respective subsidiaries have or may have with respect to the agreements
described in subsections (i), (ii), (iii) and (iv) of this
Section 4.03.

 

ARTICLE 5

 

PARTIES’ REPRESENTATION AND WARRANTIES

 

Section 5.01.  Representations and Warranties of the Parties.

 

(a)                                  Westar
represents and warrants to POI and POIA that:

 

(i)                                     it
is a corporation validly existing and in good standing under the laws of the
State of Kansas;

 

8

 

(ii)                                  it
has all corporate power and authority to execute and deliver this Settlement
Agreement and to perform its obligations hereunder;

 

(iii)                               the
execution, delivery and performance of this Settlement Agreement by Westar, and
the consummation by Westar of the transactions contemplated hereby, have been
duly authorized by all necessary corporate action on the part of Westar,
including by its board of directors;

 

(iv)                              this
Settlement Agreement has been duly and validly executed and delivered by Westar
and (assuming the due authorization, execution and delivery hereof by POI and
POIA) constitutes a legal, valid and binding obligation of Westar enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity);

 

(v)                                 the
execution and delivery by Westar of this Settlement Agreement, the consummation
of the transactions contemplated hereby, and compliance by Westar with any of
the provisions hereof will not conflict with, constitute a default under or
violate (x) any of the terms, conditions or provisions of its articles of
incorporation or by-laws, (y) any of the terms, conditions or provisions
of any document, agreement or other instrument to which Westar is a party or by
which its property is bound, or (z) any judgment, writ, injunction,
decree, order or ruling of any court or governmental authority binding on it or
its property;

 

(vi)                              no
consent, approval, waiver, license or authorization or other action by, or
filing with, any court or governmental agency, commission or authority is
required in connection with the execution and delivery by Westar of this
Settlement Agreement, the consummation by Westar of the transactions
contemplated hereby and compliance by Westar with any of the provisions hereof;
and

 

(vii)                           Westar
is the legal and beneficial owner of the Notes, free and clear of any Liens and
at the Settlement Closing will transfer good and valid title to the Notes free
and clear of any Liens.  No
representation or warranty is made hereby as to the value or priority of any
claim under or by virtue of ownership of the Notes.

 

(b)                                 POI
represents and warrants to Westar that:

 

(i)                                     it
is a corporation validly existing and in good standing under the laws of the
State of Delaware;

 

(ii)                                  it
has all corporate power and authority to execute and deliver this Settlement
Agreement and to perform its obligations hereunder;

 

(iii)                               the
execution, delivery and performance of this Settlement Agreement by POI, and
the consummation by POI of the transactions contemplated hereby, have been

 

9

 

duly authorized by all necessary corporate
action on the part of POI, including by 
its board of directors;

 

(iv)                              this
Settlement Agreement has been duly and validly executed and delivered by POI
and (assuming the due authorization, execution and delivery hereof by Westar
and POIA) constitutes a legal, valid and binding obligation of POI enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity);

 

(v)                                 the
execution and delivery by POI of this Settlement Agreement, the consummation of
the transactions contemplated hereby, and compliance by POI with any of
the provisions hereof will not conflict with, constitute a default under or
violate (x) any of the terms, conditions or provisions of its certificate
of incorporation or by-laws, (y) any of the terms, conditions or
provisions of any document, agreement or other instrument to which POI is a
party or by which its property is bound, or (z) any judgment, writ,
injunction, decree, order or ruling of any court or governmental authority
binding on it or its property; and

 

(vi)                              no
consent, approval, waiver, license or authorization or other action by, or
filing with, any court or governmental agency, commission or authority is
required in connection with the execution and delivery by POI of this
Agreement, the consummation by POI of the transactions contemplated hereby and
compliance by POI with any of the provisions hereof.

 

(c)                                  POIA
represents and warrants to Westar that:

 

(i)                                     it
is validly constituted, validly existing and in good standing under the laws of
the State of Delaware;

 

(ii)                                  it
has all necessary power and authority to execute and deliver this Settlement
Agreement and to perform its obligations hereunder;

 

(iii)                               the
execution, delivery and performance of this Settlement Agreement by it, and the
consummation by it of the transactions contemplated hereby, have been duly
authorized by all corporate or partnership or other similar actions on its part
that are necessary to make it a valid and binding obligation;

 

(iv)                              this
Settlement Agreement has been duly and validly executed and delivered by it and
(assuming the due authorization, execution and delivery hereof by Westar and
POI) constitutes its legal, valid and binding obligation enforceable against it
in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity);

 

10

 

(v)                                 the
execution and delivery by it of this Settlement Agreement, the consummation of
the transactions contemplated hereby, and compliance by it with any of the
provisions hereof will not conflict with, constitute a default under or violate
(x) any of the terms, conditions or provisions of its constitutional
documents, (y) any of the terms, conditions or provisions of any document,
agreement or other instrument to which it is a party or by which its property
is bound, or (z) any judgment, writ, injunction, decree, order or ruling
of any court or governmental authority binding on it or its property; and

 

(vi)                              no
consent, approval, waiver, license or authorization or other action by, or
filing with, any court or governmental agency, commission or authority is
required in connection with the execution and delivery by it of this Settlement
Agreement, the consummation by it of the transactions contemplated hereby and
compliance by it with any of the provisions hereof.

 

ARTICLE 6.

 

MISCELLANEOUS

 

Section 6.01.  Notices.  All notices, requests and other
communications to any Party shall be in writing (including facsimile transmission
and shall be given,

 

if to POI, to:

 

Protection One, Inc.

1035 N. 3rd Street, Suite 101

Lawrence, Kansas  66112

Attention:  Darius Nevin

Facsimile No.:  (785) 575-6511

 

with a copy to:

 

Kirkland & Ellis

200 East Randolph Drive

Chicago, Illinois  60601

Attention:  Anup Sathy

Facsimile No.:  (312) 660-0641

 

if to POIA, to:

 

Quadrangle Advisors LLC

375 Park Avenue; 14th Floor

New York, NY  10152

Attention:  David A. Tanner

Facsimile No.:  (212) 418-1701

 

11

 

with a copy to:

 

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, New York  10019-6099

Attention:  Michael J. Kelly

Facsimile No.:  (212) 728-9686

 

and to:

 

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York  10019-3954

Attention:  Alan M. Klein

Facsimile No.:  (212) 455-3188

 

if to Westar, to:

 

Westar Energy, Inc.

818 S. Kansas Avenue

Topeka, Kansas  66612

Attention:  General Counsel

Facsimile No.:  (785) 575-1936

 

with a copy to:

 

Davis Polk & Wardwell

1600 El Camino Real,

Menlo Park, California  94025

Attention:  Daniel G. Kelly, Jr. 

Facsimile No.:  (650) 752-3601

 

or such other
address or facsimile number as such Party may hereafter specify for the purpose
by notice to the other Parties.  All such
notices, requests and other communications shall be deemed received on the date
of receipt by the recipient thereof if received prior to 5:00 p.m. in the
place of receipt and such day is a Business Day in the place of receipt.  Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next
succeeding Business Day in the place of receipt.

 

Section 6.02.  No Waiver. 
The failure of a Party to insist upon strict adherence to any term of
this Settlement Agreement on any occasion shall not be considered a waiver of
such Party’s rights or deprive such Party of the right thereafter to insist
upon strict adherence to that term or any other term of this Settlement
Agreement.

 

Section 6.03.  Public Announcements.  No Party shall make any press release
or other public statement of this Agreement or the transactions contemplated
hereby prior to the Settlement Date. 
After the Settlement Date, a Party shall consult with each other Party
before

 

12

 

issuing any
press release or making any other public statement with respect to this
Agreement or the transactions contemplated hereby.

 

Section 6.04.  Expenses.  Except as otherwise provided herein, all
costs and expenses incurred in connection with this Settlement Agreement shall
be paid by the Party incurring such cost or expense.

 

Section 6.05.  Governing Law.  This Settlement Agreement shall be governed
by and construed in accordance with the law of the State of Delaware, without
regard to the conflicts of law rules of such state.

 

Section 6.06.  Jurisdiction.  The Parties agree that any suit, action or
proceeding seeking to enforce any provision of, or based on any matter arising
out of or in connection with, this Settlement Agreement or the transactions contemplated
hereby shall be brought in any federal court located in Delaware or any
Delaware state court, so long as one of such courts shall have subject matter
jurisdiction over such suit, action or proceeding, and that any cause of action
arising out of this Settlement Agreement shall be deemed to have arisen from a
transaction of business in the State of Delaware, and each of the Parties
hereby irrevocably consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
that it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient
forum.  Process in any such suit, action
or proceeding may be served on any Party anywhere in the world, whether within
or without the jurisdiction of any such court. 
Without limiting the foregoing, each Party agrees that service of
process on such Party as provided in Section 6.01 shall be deemed
effective service of process on such Party.

 

Section 6.07.  WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 6.08.  Amendment. 
Any modification to this Settlement Agreement shall not be valid or
enforceable unless in writing and signed by all parties to this Settlement
Agreement.  It is expressly agreed that
this Settlement Agreement cannot be modified orally, by course of dealing, or
by implied agreement.

 

Section 6.09.  Counterparts.  The Parties agree that this Settlement
Agreement may be executed in one or more counterparts, any one of which may not
contain the signature of more than one Party, but all such counterparts taken
together shall constitute one and the same agreement.  The Parties further agree that fax copies of
this Settlement Agreement in counterpart or otherwise bearing signatures of
Parties may be treated as executed original documents.

 

Section 6.10.  Specific Performance.  The Parties acknowledge that money damages
alone will not be adequate to remedy a breach of this Settlement
Agreement.  Each Party hereby consents to
the specific performance of this Settlement Agreement.  In the event that legal action is instituted
between the Parties to enforce this Settlement Agreement, the prevailing Party
shall

 

13

 

be entitled to
recover from the losing party all costs and expenses of litigation, including
without limitation court costs and reasonable attorneys’ fees.

 

Section 6.11.  Entire Agreement.  This Settlement Agreement constitutes the
complete agreement between the Parties and all promises, representations,
understandings, warranties, and agreements with reference to the subject matter
of this Settlement Agreement and all inducements to the making of this
Settlement Agreement relied upon by either Party has been fully expressed in
this Settlement Agreement.  The Parties
expressly acknowledge that, other than as set out in this Settlement Agreement,
they are not relying on any representation or warranty of the other in entering
into this Settlement Agreement.

 

Section 6.12.  Further Assurances.  Each of the Parties agrees that it will
cooperate and take all actions reasonably requested in order to give full
effect to the provisions and intent of this Settlement Agreement and will
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, to the other Parties such instruments, agreements and other
documents (including any instruments of sale, assignment, transfer or conveyance
or other documents reasonably requested in order to effectuate the sale,
assignment, transfer or conveyance of the Notes to POI) reasonably requested in
order to evidence or effectuate the agreements described in this Settlement
Agreement.

 

Section 6.13.  Successors and Assigns.  This Settlement Agreement may not be assigned
by any of the Parties hereto (whether by operation of law or otherwise) without
the prior written consent of each of the other Parties.  This Settlement Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns.

 

Section 6.14.  Limited Third Party Beneficiaries.  Other than the provisions of Article 4,
with respect to which the Persons released thereby are intended third party
beneficiaries, the provisions of this Settlement Agreement are solely for the
benefit of the Parties and are not intended to confer upon any Person any
rights or remedies hereunder and there are no other third party beneficiaries
of this Settlement Agreement.

 

14

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.

 

 

	
   

  	
  WESTAR ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark A.
  Ruelle

  	
   

  
	
   

  	
  Name: Mark
  A. Ruelle

  
	
   

  	
  Title: EVP
  and CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROTECTION ONE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Darius
  G. Nevin

  	
   

  
	
   

  	
  Name: Darius
  G. Nevin

  
	
   

  	
  Title: EVP
  and CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  POI ACQUISITION, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David A.
  Tanner

  	
   

  
	
   

  	
  Name: David
  A. Tanner

  
	
   

  	
  Title:
  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  POI ACQUISITION I, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David A.
  Tanner

  	
   

  
	
   

  	
  Name: David
  A. Tanner

  
	
   

  	
  Title:
  President

  

 

 

ANNEX VI

 

EXECUTION
VERSION

 

POI ACQUISITION I, INC.

 

November 12, 2004

 

Protection One, Inc.

1035 North 3rd Street, Suite 101

Lawrence, Kansas 66044

Attn:               Darius
G. Nevin

Executive Vice President and Chief Financial
Officer

 

Dear Mr. Nevin:

 

1.                                       We
refer to the:  (a) Equity Standstill
Agreement, dated as of February 17, 2004 (the “Agreement”), by and
between Protection One, Inc. (“POI”) and POI Acquisition I, Inc. (“POI
Acquisition”); (b) letter from POI Acquisition to POI, dated May 17, 2004,
amending the term of the Agreement; (c) letter from POI Acquisition to POI,
dated May 24, 2004, further amending the term of the Agreement; (d) letter from
POI Acquisition to POI, dated May 28, 2004, further amending the term
of the Agreement; (e) letter from POI Acquisition to POI, dated June 28, 2004,
further amending the term of the Agreement; (f) letter from POI Acquisition to
POI, dated July 26, 2004, further amending the term of the Agreement; (g)
letter from POI Acquisition to POI, dated August 23, 2004, further amending the
term of the Agreement; (h) letter from POI Acquisition to POI, dated September
20, 2004, further amending the term of the Agreement; and (i) letter from POI
Acquisition to POI, dated October 18, 2004, further amending the term of the
Agreement (the “Eighth Letter Agreement”). 
Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Agreement.

 

2.                                       Pursuant
to section 2.02 of the Agreement, the Agreement shall terminate and be of no
further force and effect on the Specified Date (which currently, under clause
(i) of section 2.02 of the Agreement, as amended by the Eighth Letter
Agreement, is 11:59 p.m. prevailing Eastern Time on November 15, 2004).  By this letter agreement and at your request,
we hereby agree to further amend the definition of the Specified Date to mean
the date which is the earlier of: (i) the Closing Date (as defined in the
Exchange Agreement, dated as of November 12, 2004 (the “Exchange Agreement”),
by and among POI, Protection One Alarm Monitoring, Inc., POI Acquisition,
L.L.C., POI Acquisition and Quadrangle Master Funding Ltd), (ii) the
termination of the Exchange Agreement pursuant to its terms, or (iii) the
occurrence of any Equity Standstill Termination Event.  In addition, (i) notwithstanding section
2.01(b)(i) of the Agreement, the acquisition

 

 

of shares of common stock of POI pursuant to the Restructuring (as
defined in the Exchange Agreement) shall be permitted and (ii) notwithstanding
section 2.01(b)(ii) of the Agreement, POI Acquisition shall be entitled to
transfer any or all of the Shares in accordance with section 3.5 of the
Exchange Agreement. Except as otherwise provided herein, the Agreement shall
remain in full force and effect subject to the terms and provisions thereof.

 

*                                         *                                         *                                         *

 

 

This letter agreement may be executed in counterparts.  Please confirm your agreement with the
foregoing by signing and returning to the undersigned the duplicate copy of
this letter agreement enclosed herewith.

 

	
  Very truly yours,

  	
   

  
	
   

  	
   

  
	
  POI ACQUISITION I, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ David A. Tanner

  	
   

  
	
  Name:

  	
  David A. Tanner

  	
   

  
	
  Title:

  	
  President

  
				

 

 

	
  Agreed as of the date first written above:

  	
   

  
	
   

  	
   

  
	
  PROTECTION ONE, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Darius G. Nevin

  	
   

  
	
  Name:

  	
  Darius G. Nevin

  
	
  Title:

  	
  Executive Vice President and CFO

  
				

 

ANNEX VII

 

EXECUTION VERSION

 

POI ACQUISITION, L.L.C.

QUADRANGLE MASTER
FUNDING LTD

 

 

November 12, 2004

 

Protection One Alarm
Monitoring, Inc.

Protection One, Inc.

Network Multi-Family Security Corporation

c/o Protection One, Inc.

1035 North 3rd Street, Suite 101

Lawrence, Kansas 66044

 

Ladies and Gentlemen:

 

1.                                       We
refer to the:  (a) Credit Facility
Standstill Agreement, dated as of February 17, 2004 (the “Agreement”), among
Protection One Alarm Monitoring, Inc. (“POAM”), Protection One, Inc. (“POI”),
Network Multi-Family Security Corporation (“Network”) and POI Acquisition,
L.L.C. (“POI Acquisition”); (b) letter from Quadrangle Master Funding Ltd (“Quadrangle”)
to POAM, dated February 27, 2004, (i) advising POAM of Quadrangle’s assumption
from POI Acquisition of one-third of the obligations under the Credit Facility;
and (ii) confirming Quadrangle’s agreement to be bound by the obligations of
POI Acquisition set forth in the Agreement; (c) letter from POI Acquisition and
Quadrangle to POAM, POI and Network, dated May 17, 2004, amending the term of
the Agreement (except as otherwise provided therein); (d) letter from POI
Acquisition and Quadrangle to POAM, POI and Network, dated May 24, 2004,
further amending the term of the Agreement (except as otherwise provided
therein); (e) letter from POI Acquisition and Quadrangle to POAM, POI and
Network, dated May 28, 2004, further amending the term of the Agreement (except
as otherwise provided therein); (f) letter from POI Acquisition and Quadrangle
to POAM, POI and Network, dated June 28, 2004, further amending the term of the
Agreement (except as otherwise provided therein); (g) letter from POI
Acquisition and Quadrangle to POAM, POI and Network, dated July 26, 2004,
further amending the term of the Agreement (except as otherwise provided
therein); (h) letter from POI Acquisition and Quadrangle to POAM, POI and
Network, dated August 23, 2004, further amending the term of the Agreement
(except as otherwise provided therein); (i) letter from POI Acquisition and
Quadrangle to POAM, POI and Network, dated September 20, 2004, further
extending the term of the Agreement (except as otherwise provided therein); and
(j) letter from POI Acquisition and Quadrangle to POAM, POI and Network, dated
October 18, 2004, further extending the term of the Agreement (except as
otherwise provided therein) (the “Eighth Letter Agreement”).  Capitalized terms

 

 

used but not defined herein shall have the meanings
ascribed to such terms in the Agreement.

 

2.                                       Pursuant
to section 3 of the Agreement, the Agreement shall terminate and be of no
further force and effect on the Debt Specified Date (which currently, under
clause (i) of section 3 of the Agreement, as amended by the Eighth Letter
Agreement, is 11:59 p.m. prevailing Eastern Time on November 15, 2004).  By this letter agreement and at your request,
we hereby agree to amend the definition of the Debt Specified Date to mean the
date which is the earlier of: (i) the Closing Date (as defined in the Exchange
Agreement, dated as of November 12, 2004 (the “Exchange Agreement”), by and
among POI, Protection One Alarm Monitoring, Inc., POI Acquisition I, Inc., POI
Acquisition and Quadrangle Master Funding Ltd), (ii) the termination of the
Exchange Agreement pursuant to its terms, or 
(iii) the occurrence of any Termination Event, provided that a
Termination Event shall not be deemed to have occurred as a result of any
action performed or contemplated to be performed pursuant to the Exchange
Agreement or any document referenced therein. 
This letter agreement shall not apply to section 5 of the
Agreement.  Except as otherwise provided
herein, the Agreement shall remain in full force and effect subject to the
terms and provisions thereof.

 

3.                                       This
letter agreement may be executed in counterparts.  Please confirm your agreement with the
foregoing by signing and returning to the undersigned the duplicate copy of
this letter agreement enclosed herewith.

 

*                                         *                                         *                                         *

 

 

	
  Very truly yours,

  	
   

  
	
   

  	
   

  
	
  POI ACQUISITION, L.L.C.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ David A. Tanner

  	
   

  	
   

  
	
  Name: David A. Tanner

  	
   

  
	
  Title:  
  Member

  	
   

  
	
   

  	
   

  
	
  QUADRANGLE MASTER

  	
   

  
	
  FUNDING LTD

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Michael Weinstock

  	
   

  	
   

  
	
  Name: Michael Weinstock

  	
   

  
	
  Title:  
  Member

  	
   

  
					

 

 

	
  Agreed as of the date first written above:

  	
   

  
	
   

  	
   

  
	
  PROTECTION ONE ALARM

  	
   

  
	
  MONITORING, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Darius G. Nevin

  	
   

  	
   

  
	
  Name: Darius G. Nevin

  	
   

  
	
  Title:  
  Executive Vice President and CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PROTECTION ONE, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Darius G. Nevin

  	
   

  	
   

  
	
  Name: Darius G. Nevin

  	
   

  
	
  Title: 
  Executive Vice President and CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  NETWORK MULTI-FAMILY

  	
   

  
	
  SECURITY CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Steve Williams

  	
   

  	
   

  
	
  Name: Steve Williams

  	
   

  
	
  Title:   President

  	
   

  
					

 

 

ANNEX VIII

 

STOCKHOLDERS AGREEMENT

 

STOCKHOLDERS
AGREEMENT, dated as of [     ], 2005, by and among
Quadrangle Master Funding Ltd, a Cayman Islands limited company (together with
any of its Affiliates that receive Common Shares in a Permitted Transfer (as
defined below), “QDRF”), POI Acquisition, LLC, a Delaware limited
liability company (together with any of its Affiliates that receive Common
Shares in a Permitted Transfer, “POI Acquisition”), and Protection One,
Inc., a Delaware corporation (the “Company”).  Each of QDRF and POI Acquisition is referred
to individually as a “Stockholder” and, collectively, as the “Stockholders”.

 

WHEREAS,
(i) POI Acquisition owns two-thirds of the outstanding shares of common stock
of POI Acquisition I, Inc (“PAII”), which directly owns approximately
88% of the outstanding shares of common stock of the Company, and QDRF owns
one-third of the outstanding shares of common stock of PAII and (ii) POI
Acquisition owns two-thirds of the lenders’ rights under a Revolving Credit
Facility with Protection One Alarm Monitoring, Inc, (“POAM”) a
wholly-owned Subsidiary of the Company, dated December 21, 1998 (as modified,
amended, renewed, extended or restated from time to time, the “Credit
Facility”) and QDRF owns one-third of the lenders’ rights under the Credit
Facility;

 

WHEREAS,
pursuant to an exchange agreement dated as of November 12, 2004 (the “Exchange
Agreement”), in connection with discharge of certain indebtedness under the
Credit Facility, the Company will issue [     ] Common
Shares (as defined below) to POI Acquisition and [     ]
Common Shares to QDRF (the “Restructuring”); and

 

WHEREAS,
in connection with the Restructuring the Company and each of the Stockholders
desire to make certain arrangements among themselves with respect to the
matters set forth herein;

 

NOW,
THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

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

 

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

 

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

 

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

 

 

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

 

Cash
Equivalents:  Any of
the following:

 

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

 

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

 

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

 

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

 

Closing:  As defined in the Exchange Agreement.

 

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

 

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

 

Excluded
Securities:  As defined
in Section 5.2 herein.

 

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

 

 

officer, employee,
partner, creditor, customer, supplier or other person and (y) who does not have
a relationship with the Company that may interfere with his exercise of
independence from management and the Company.

 

Listing
Event:  Approval of the
Company’s application to list its Common Shares on the New York Stock Exchange
or the NASDAQ Stock Market.

 

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

 

Permitted
Transfer: As defined in Section 3.2.

 

Permitted
Transferee: As defined in Section 3.2.

 

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

 

POI
Acquisition:  As
defined in the recitals.

 

Protection
One Entities:  The
Company and its Subsidiaries.

 

QDRF:  As defined in the recitals.

 

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

 

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

 

Registration
Rights Agreement:  The
registration rights agreement dated as of [•], 2005 by and among POI
Acquisition, QDRF and the Company.

 

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

 

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

 

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

 

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

 

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

 

 

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

 

ARTICLE
II

CORPORATE GOVERNANCE

 

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

 

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

 

(ii)                                one shall be designated
by QDRF (the “QDRF Designee”);

 

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

 

(iv)                              one
shall be an Independent Person selected by a majority of the other directors.

 

 

(b)   At such time as POI Acquisition shall cease
to own Common Shares in an amount equal to at least 25% of the Common Shares
issued and outstanding as of the Closing, POI Acquisition shall have the right
to designate one Acquisition Designee rather than two Acquisition Designees pursuant
to Section 2.1(a) above.  At such time as
POI Acquisition shall cease to own Common Shares in an amount equal to at least
10% of the Common Shares issued and outstanding as of the Closing, POI
Acquisition shall cease to have the right to designate a director to the Board
of Directors pursuant to Section 2.1(a) above. 
Upon each of the triggering events set forth in this Section 2.1(b)
above, POI Acquisition shall promptly cause one of its Acquisition Designees to
resign from the Board of Directors and all committees thereof.  Upon any such resignation, the Stockholders
will use their reasonable best efforts to cause the directors remaining in
office to either decrease the size of the Board of Directors to eliminate such
vacancy or cause the vacancy created thereby to be filled by a designee
selected by a majority of the directors remaining in office.

 

(c)   At such time as QDRF shall cease to own
Common Shares in an amount equal to at least 10% of the Common Shares issued
and outstanding as of the Closing, QDRF shall cease to have the right to
designate a director to the Board of Directors pursuant to Section 2.1(a) above
and QDRF shall promptly cause its QDRF Designee to resign from the Board of
Directors and all committees thereof. 
Upon any such resignation, the Stockholders will use their reasonable
best efforts to cause the directors remaining in office to either decrease the
size of the 

 

 

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

 

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

 

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

 

(f)   Until such time as POI Acquisition ceases to
own Common Shares in an amount equal to at least 40% of the Common Shares
issued and outstanding as of the Closing, POI Acquisition shall have the right,
exercisable at any time upon delivery of written notice to QDRF and the
Company, to elect to cause the Board of Directors to be increased to include
one additional director and designate a new director (the “Acquisition
Election”).  Upon making the Acquisition
Election, the Stockholders (and their respective Stockholder Designees) and the
Company shall use their reasonable best efforts to take all appropriate action
to cause the size of the Board of Directors to be increased to include a
director designated by POI Acquisition. 
Upon making the Acquisition Election, (i) the number of Acquisition
Designees set forth in Section 2.1(a)(i) shall be increased by one and (ii) at
such time as POI Acquisition shall cease to own Common Shares in an amount
equal to at least 40% of the Common Shares issued and outstanding as of the
Closing, POI Acquisition shall promptly cause one of its Acquisition Designees
to resign from the Board of Directors and all committees thereof.  Upon any such resignation, the Stockholders
will use their reasonable best efforts to cause the directors remaining in
office to either decrease the size of the Board of Directors to eliminate such
vacancy or cause the vacancy created thereby to be filled by a designee
selected by a majority of the directors remaining in office.

 

(g)   If any Stockholder entitled to designate
directors hereunder requests in writing that any of its designees be removed as
a director, the other Stockholder shall vote, or act by written consent with
respect to, all Common Shares owned directly or indirectly by such other
Stockholder and otherwise take or cause to be taken all actions necessary to
remove such director

 

 

designated by such
Stockholder.  Unless a Stockholder shall
otherwise request in writing, no other Stockholder shall take any action to
cause the removal of any directors designated by such Stockholder.  In the event that a vacancy is created at any
time by the death, disability, retirement, resignation or removal (with or
without cause) of any director designated by a Stockholder, so long as such
Stockholder has the right to designate a replacement designee at such time, the
Company and the other Stockholder shall use their reasonable best efforts to
take all appropriate action necessary to cause the vacancy created thereby to
be filled by the replacement designated by such Stockholder.

 

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

 

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

 

Section
2.2.   Bylaws.  (a)  At the first meeting of the Board of
Directors following the date of this Agreement, the Stockholders shall vote to
amend the bylaws of the Company as in effect on the date hereof to provide
that, in addition to any vote or consent of the Board of Directors or the
stockholders of the Company required by law or the Company’s certificate of
incorporation, if and for so long as QDRF retains the right to designate the
QDRF Designee pursuant to Section 2.1(a), the Company shall not take any of the
following actions without the consent of QDRF:

 

(i)                                   voluntarily
initiate any bankruptcy, dissolution or winding up or any analogous proceeding
in any jurisdiction with respect to any of the Protection One Entities;

 

(ii)                                merge or consolidate
with any other Person (other than (i) a transaction between the Company and one
or more of its wholly-owned Subsidiaries, (ii) a transaction subject to the
provisions of Section 4.3 or (iii) a transaction occurring more than two years
after the Closing);

 

(iii)                             sell all or substantially
all of the assets of the Company; or

 

(iv)                            obligate or otherwise commit
to do any of the foregoing.

 

 

(b)  If and for so long as the consent of QDRF
described in Section 2.2(a) above is required, without the prior consent of
QDRF, neither the Company nor any other Stockholder shall take any action to
amend the bylaws of the Company in any manner that would impair QDRF’s exercise
of such rights.

 

(c)  For purposes of this Agreement, a Stockholder
shall be deemed to own its proportional interest of any Common Shares held by a
Person beneficially owned by such Stockholder (determined based on such
Stockholder’s pro rata direct or indirect equity interest in such Person),
including, without limitation, Common Shares held by PAII.

 

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

 

 

ARTICLE
III

TRANSFERS

 

Section
3.1.   Transfer Restrictions. 
(a)  Subject to compliance with
Sections 3.3 and 3.4, QDRF may directly or indirectly offer, transfer, sell,
assign, pledge or otherwise dispose of any economic, voting or other rights in
or to (any such act, a “transfer”) all or a portion of its Common Shares
at any time (i) in a Permitted Transfer, (ii) in a transfer pursuant to
Sections 4.2 or 4.3 or (iii) subject to compliance with Section 4.1, in any
other transfer.

 

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

 

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

 

(b)   To the extent a Stockholder or Permitted
Transferee described in clause (i) above is not an individual or an estate, and
a Person (which is not a Permitted Transferee of the Stockholder or of such
Permitted Transferee, as the case may be) acquires Control of such Stockholder
or Permitted Transferee, (x) such acquisition of Control shall be deemed to be
a transfer of the Common Shares held by such Stockholder or Permitted
Transferee subject to the 

 

 

restrictions on transfer
contained in this Agreement (including, without limitation, Articles III and IV
hereof) and (y) to the extent such Stockholder or Permitted Transferee then
holds assets in addition to Common Shares, the determination of the purchase
price deemed to have been paid for the Common Shares held by such Permitted
Transferee in such deemed transfer for purposes of the provisions of this Agreement
shall be made by the Board of Directors in good faith.

 

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

 

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

 

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

 

(c)   As a condition to any transfer of Common
Shares (other than pursuant to a 
Registered Sale or a Rule 144 Sale or a Below 10% Sale), the transferee
shall agree (pursuant to an agreement in form and substance reasonably
acceptable to the Company) to become a party to this Agreement and shall have
such rights and obligations of its transferor for purposes of Articles III and
IV; provided, that a transferee of Common Shares pursuant to clause (i)
of Section 3.2(a) shall have all of the rights and obligations of the
transferor Stockholder;  provided,
further, that, in connection with a transfer of at least 10% of the
outstanding Common Shares by a Stockholder, such Stockholder may also assign
its rights and obligations under Section 2.1 to such transferee, and in such
circumstances, the transferee shall have the rights and obligations of the
transferor Stockholder under such Section; provided, however,
that such transferee shall not be entitled to designate a Stockholder Designee
or an Observer unless such Stockholder Designee or Observer, as the case may
be, is reasonably acceptable to the Board of Directors.

 

ARTICLE
IV

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

 

Section
4.1.   Right of First Offer. 
(a)  If QDRF (for purposes of this
Section 4.1, a “Selling Stockholder”) proposes to transfer (unless the
proposed transfer is a Permitted Transfer or a transfer pursuant to such
Selling Stockholder’s “tag-along” rights under Section 4.2, in which case the
following provisions need not be complied with) all or any portion of its
Common Shares (the number of Common Shares proposed to be transferred by the
Selling 

 

 

Stockholder, the “Subject
Securities”), the Selling Stockholder shall deliver a notice of intention
to sell (a “Sale Notice”) to POI Acquisition (the “Offeree
Stockholder”) setting forth the number of Subject Securities proposed to be
transferred, an irrevocable offer to sell such Subject Securities to the
Offeree Stockholder and the terms and conditions pursuant to which the Selling
Stockholder is offering to sell such Subject Securities.

 

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

 

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

 

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

 

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

 

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

 

Section
4.2.   Tag-Along Rights. 
(a)  In the event that POI
Acquisition (for purposes of this Section 4.2, a “Selling Stockholder”)
proposes to transfer (other than by way of a Permitted Transfer) all or any
portion of the Common Shares owned by such Selling Stockholder (any of the
foregoing, a “Sale”), then unless such Selling Stockholder is entitled
to give and does give a Drag-Along Notice pursuant to Section 4.3, such Selling
Stockholder shall give notice (a “Notice of Intention to Sell”) to the
other Stockholder (for purposes of this Section 4.2, the “Other Stockholder”)
and the Company promptly, and in any event not more than 10 days after the
execution and delivery by all the parties thereto of the definitive agreement 

 

 

relating to the Sale,
setting forth in reasonable detail the terms and conditions of such proposed
Sale, including the number of Common Shares proposed to be so transferred, the
name of the third party purchaser, the proposed amount and form of
consideration.  In the event that the
terms and/or conditions set forth in the Notice of Intention to Sell are
thereafter amended in any respect, the Selling Stockholder shall give written
notice (an “Amended Notice”) of the amended terms and conditions of the
proposed Sale promptly to the other Stockholder and the Company.

 

(b)   The Other Stockholder shall have the right,
exercisable upon written notice to the Selling Stockholder within 20 days after
such Stockholder’s receipt of any Notice of Intention to Sell, or, if later,
within 20  days of such Stockholder’s
receipt of the most recent Amended Notice, to participate in the proposed Sale
by the Selling Stockholder to the proposed purchaser on the terms and
conditions set forth in such Notice of Intention to Sell or the most recent
Amended Notice, as the case may be (such participation rights being hereinafter
referred to as “tag-along” rights).  Each
Stockholder may participate with respect to the Common Shares owned by such
Stockholder in an amount equal to the product obtained by multiplying (i) the
aggregate number of Common Shares owned by such Stockholder by (ii) a fraction,
the numerator of which is equal to the number of Common Shares proposed to be
sold or transferred by the Selling Stockholder and the denominator of which is
the aggregate number of Common Shares owned by the Selling Stockholder.  If the Other Stockholder has not notified the
Selling Stockholder of its intent to exercise tag-along rights 20 days after
receipt of the Notice of Intention to Sell or, if later, within 20 days of
receipt of an Amended Notice, the Other Stockholder shall be deemed to have
elected not to exercise such tag-along rights with respect to the Sale
contemplated by such Notice of Intention to Sell or such Amended Notice, as the
case may be (in the case of an Amended Notice, regardless of its election
pursuant to the Notice of Intention to Sell relating to such Sale).  If the number of Common Shares elected to be
sold by the Selling Stockholder and the Other Stockholder is greater than the
number of Common Shares specified in the Notice of Intention to Sell, the
number of Common Shares being sold by each such holder shall be reduced such
that the applicable holder shall be entitled to (and obligated to) sell only
its pro rata portion of Common Shares (based on the number of Common Shares
owned by such holder to the total number of Common Shares owned by all of such
electing holders).  If a Stockholder
elects not to include the maximum number of Common Shares that such holder
would have been permitted to include in a proposed Sale, the Selling
Stockholder and the Other Stockholder may sell in the proposed Sale a number of
additional Common Shares owned by any of them equal to their pro rata portion
of the number of Common Shares eligible to be included in the proposed Sale and
not so elected to be included (based on the number of Common Shares owned by
such holder to the total number of Common Shares owned by all of such electing
holders).

 

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

 

(d)   In connection with any Sale pursuant to this
Section 4.2, the Other Stockholder shall make to the purchaser in the Sale the
same representations, warranties, covenants, indemnities and agreements as the
Selling Stockholder makes in connection with the proposed Sale (except that in
the case of representations, warranties, covenants, indemnities and agreements
pertaining specifically to the Selling Stockholder, a Stockholder exercising
its “tag-along” rights shall make the comparable representations, warranties,
covenants, indemnities and 

 

 

agreements pertaining
specifically to itself); provided, that all representations, warranties,
covenants and indemnities shall be made by the Selling Stockholder and the
Other Stockholder severally and not jointly. 
Each Stockholder participating in the Sale will be responsible for
funding its proportionate share of any escrow arrangements in connection with
the Sale and for its proportionate share of any withdrawals therefrom.  All fees, commissions, adjustments to
purchase price, expenses and indemnities of the Selling Stockholder and the
Other Stockholder thereunder shall be borne by each of them on a pro rata basis based on the number of
Common Shares sold by each of them in such Sale.

 

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

 

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

 

 

and expenses in
connection with the of the Drag-Along Sale. 
If the Drag-Along Sale is not consummated within 90 days from the date
of the Drag-Along Notice (subject to extension
to obtain any necessary regulatory approvals), the Selling
Stockholder(s) must deliver another Drag-Along Notice in order to exercise
their rights under this Section 4.3 with respect to such Drag-Along Sale.

 

 

ARTICLE
V

PREEMPTION

 

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

 

(b)   In the event the Company proposes to
undertake an issuance for cash of POI Securities to any Person, it shall give
the Stockholders written notice (the “Preemptive Notice”) of its
intention to sell POI Securities for cash, the price, the identity of the
purchaser and the principal terms upon which the Company proposes to issue the
same.  Subject to Section 5.1(a), each
Stockholder shall have ten Business Days from the delivery date of any
Preemptive Notice to agree to purchase a number of POI Securities up to its
Preemptive Right Pro Rata Share of POI Securities (in each case calculated
prior to the issuance) for the price and upon the terms specified in the
Preemptive Notice by giving written notice to the Company and stating therein
the number of POI Securities to be purchased.

 

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

 

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

 

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

 

(b)   any issuance of securities in connection
with any business combination or acquisition transaction involving any Protection
One Entity, including any 

 

 

issuance to the
equityholders or management of the entity that is the subject of such business
combination or acquisition transaction; or

 

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

 

ARTICLE
VI

MISCELLANEOUS

 

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

 

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

 

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

 

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

 

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

 

Section
6.6.   Notices.  Any
notice or other communications required or permitted hereunder shall be deemed
to be sufficient and received if contained in a written instrument 

 

 

delivered in person or by
courier or duly sent by first class certified mail, postage prepaid, or by
facsimile addressed to such party at the address or facsimile number set forth
below:

 

	
  (1)

  	
  If to the
  Company to:

  
	
   

  	
   

  
	
   

  	
  Protection One,
  Inc

  
	
   

  	
  1035 N. 3rd
  Street, Suite 101

  
	
   

  	
  Lawrence, Kansas
  66044

  
	
   

  	
  Telephone:
  785-575-1707

  
	
   

  	
  Facsimile:
  785-575-1711

  
	
   

  	
  Attention:
  Darius G. Nevin

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  Kirkland &
  Ellis LLP

  
	
   

  	
  200 East
  Randolph Drive

  
	
   

  	
  Chicago,
  Illinois 60601

  
	
   

  	
  Telephone:
  312-861-2000

  
	
   

  	
  Facsimile:  312-861-2200

  
	
   

  	
  Attention: John
  M. Jennings

  
	
   

  	
   

  
	
  (2)

  	
  If to POI
  Acquisition:

  
	
   

  	
   

  
	
   

  	
  c/o Quadrangle
  Group LLC

  
	
   

  	
  375 Park Avenue

  
	
   

  	
  New York, New
  York 10152

  
	
   

  	
  Telephone:
  212-418-1700

  
	
   

  	
  Facsimile:
  212-418-1701

  
	
   

  	
  Attention: David
  Tanner

  
	
   

  	
   

  
	
  (3)

  	
  If to QDRF:

  
	
   

  	
   

  
	
   

  	
  c/o Quadrangle
  Group LLC

  
	
   

  	
  375 Park Avenue

  
	
   

  	
  New York, New
  York 10152

  
	
   

  	
  Telephone:
  212-418-1700

  
	
   

  	
  Facsimile: 212-418-1701

  
	
   

  	
  Attention:
  Michael Weinstock

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  Simpson Thacher
  & Bartlett LLP

  
	
   

  	
  425 Lexington
  Avenue

  
	
   

  	
  New York, New
  York 10017-3790

  

 

 

	
   

  	
  Telephone:
  212-455-2000

  
	
   

  	
  Facsimile:
  212-455-2502

  
	
   

  	
  Attention: Alan
  M. Klein

  
	
   

  	
   

  
	
   

  	
  and

  
	
   

  	
   

  
	
   

  	
  Willkie Farr
  & Gallagher LLP

  
	
   

  	
  787 Seventh
  Avenue

  
	
   

  	
  New York, New
  York 10019-6099

  
	
   

  	
  Telephone:
  212-728-8000

  
	
   

  	
  Facsimile:
  212-728-8111

  
	
   

  	
  Attention:
  Michael Kelly

  
	
   

  	
   

  
	
  (4)

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

  

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

Section
6.12.   Confidentiality. 
Each Stockholder acknowledges that in connection with its investment in
the Company it shall receive certain non-public, confidential proprietary
information, which may include memoranda, notes, analyses, reports,
compilations or studies prepared by or on behalf of the Company and its
Subsidiaries (“Confidential Information”).  Notwithstanding anything to the contrary
contained herein, each Stockholder agrees to use the Confidential Information
only for purposes of evaluating its investment in the Company and it shall not
use such Confidential Information in connection with any competing business or
investment or disclose any such Confidential Information to any Person, except
to the extent (i) such information is already in the public domain (other than
as a result of a disclosure in breach of this Agreement); (ii) is already known
by such Stockholder from a Person under no obligation of confidentiality to the
Company at the time such information was received by such Stockholder or is
obtained by such Stockholder from a Person under no obligation of
confidentiality to the Company, (iii) the Company agrees in writing that such
information may be disclosed; or (iv) such disclosure is required by law; provided,
however, that any such disclosures be made only to the individual or
entity to whom disclosure is required by law and only after written notice to
the Company of the required disclosure. 
If Confidential Information is to be disclosed pursuant to a requirement
of law, the disclosing Stockholder agrees to cooperate with the Company if the
Company should seek to obtain an order or other reliable assurance that
confidential treatment shall be accorded to designated portions of the
Confidential Information. 
Notwithstanding the foregoing, Stockholders may disclose Confidential
Information to their employees, directors, shareholders, partners, members,
agents and representatives who have a need to know of such information in
connection with such Stockholder’s investment in or the management of the
Company; provided, that such Persons agree to be bound by the terms of this
Section 6.13, and such Stockholder shall be liable for any breach of the
Stockholder’s obligations by such Persons.

 

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

 

Section
6.14.   Jurisdiction; No Jury Trial.  The parties hereby irrevocably and
unconditionally consent to submit to the exclusive jurisdiction of the courts
of the State of New 

 

 

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.

 

 

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

 

	
   

  	
  PROTECTION ONE,
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  POI ACQUISITION
  LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  QUADRANGLE
  MASTER FUNDING LTD

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}]]