PROTECTION ONE INC, S-3, 1996-10-08

PROTECTION ONE INC
S-3, 1996-10-08
MISCELLANEOUS BUSINESS SERVICES

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<PAGE> 1

As filed with the Securities and Exchange Commission on October 8, 1996.
Registration No. 333-_________
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-3

REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

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

PROTECTION ONE, INC.
(Exact name of registrant as specified in its charter)

Delaware 93-1063818
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)

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

6011 Bristol Parkway
Culver City, California 90230
(310) 338-6930
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

James M. Mackenzie, Jr.
President and Chief Executive Officer
Protection One, Inc.
6011 Bristol Parkway
Culver City, California 90230
(310) 338-6930
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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

Copy to:
Laura A. Loftin, Esq.
Mitchell, Silberberg & Knupp LLP
11377 West Olympic Boulevard
Los Angeles, California 90064
(310) 312-2000

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

Approximate date of commencement of proposed sale to the public: From
time to time after the later of October 30, 1996 and the date this Registration
Statement becomes effective.

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this form are being
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered solely in connection with
dividend or interest reinvestment plans, check the following box. [x]

(Facing page continued on next page)

<PAGE> 2
(Continuation of facing page)

If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
[ ]_______________

If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]_______________

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]_______________

____________________

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>

Proposed Maximum Proposed Maximum
Title of Shares Amount to be Aggregate Price Per Aggregate Offering Amount of
to be Registered Registered Unit (1) Price (1) Registration Fee
------------------ -------------- ------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share 753,800 shares $12.6875 $9,563,837.50 $3,297.48
</TABLE>

(1) Pursuant to Rule 457(c) promulgated under the Securities Act of 1933,
the offering price per share, the aggregate offering price and the
registration fee were calculated based on the average of the high and
low sale prices of the Common Stock on the Nasdaq National Market on
October 3, 1996.

____________________

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a) of
the Securities Act of 1933, may determine.

===============================================================================
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE SECURITIES,
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

PROSPECTUS Subject to Completion - Issued October 8, 1996

753,800 Shares

PROTECTION ONE, INC.

Common Stock

This Prospectus relates to an aggregate of 753,800 shares (the
"Shares") of Common Stock, par value $.01 per share ("Common Stock"), of
Protection One, Inc., a Delaware corporation ("POI"), that may be offered and
sold, from time to time, by the holders named herein (the "Selling
Stockholders"). See "Selling Stockholders." The Shares were issued (or as to
up to 34,265 Shares, are issuable) to the Selling Stockholders in private
placements made in connection with the acquisition by Protection One Alarm
Monitoring, Inc., a wholly owned subsidiary of POI ("Monitoring"), of the
security alarm accounts and certain other assets of Security Systems, Inc., an
Oregon corporation doing business as Alltec Security Systems ("Alltec") and the
outstanding capital stock of Security Holdings, Inc., an Oregon corporation
("Security Holdings"), which acquisitions were completed on September 30, 1996
and October 4, 1996, respectively. See "The Acquisitions."

The distribution of the Shares by the Selling Stockholders is not
subject to any underwriting agreement. The Selling Stockholders may offer and
sell the Shares through the Nasdaq National Market System in ordinary brokerage
transactions, in negotiated transactions or otherwise, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices, either through broker-dealers acting as agents
or brokers for the seller or through broker dealers acting as agents or
principals. Such broker- dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Stockholders and/or the purchasers of the Shares for whom such broker-dealers
act as agent, which compensation may be in excess of customary commissions.
See "Plan of Distribution." The price at which any Shares may be sold, and the
underwriting discounts and agent's commissions, if any, paid in connection with
any such sale, are unknown and may vary from transaction to transaction. To
the extent required, the purchase price, the name of any such underwriter,
dealer or agent and any applicable underwriter's discount, dealer's purchase
price or agent's commission with respect to a particular offering will be set
forth in an accompanying supplement to this Prospectus. The aggregate net
proceeds to the Selling Stockholders from the sale of any Shares will be the
price thereof less the aggregate underwriter's discount or agent's commissions,
if any. See "Plan of Distribution." POI will not receive any of the proceeds
from the sale of Shares by the Selling Stockholders, but will pay all expenses
(other than underwriting discounts and selling commissions, if any, and fees
and expenses payable to third parties), incident to the offer and sale of the
Shares.

The Selling Stockholders and any agent, broker, dealer or underwriter
that participates with the Selling Stockholder in the distribution of the
Shares may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any and all commissions received by them and any profit on
the resale of the Shares purchased by them may be deemed underwriting
commissions or discounts under the Securities Act.
(Cover page continues on next page)
<PAGE> 4
(Continuation of cover page)

The Common Stock is traded on the Nasdaq National Market under the
symbol "ALRM." On October 7, 1996, the last reported sale price for the
Common Stock was $14.00 per share.

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

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

The date of this Prospectus is _________, 1996.
<PAGE> 5
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING
DESCRIBED HEREIN MADE TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY POI, BY
ANY SELLING STOCKHOLDER OR BY ANY UNDERWRITER, DEALER OR AGENT. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF POI OR ITS SUBSIDIARIES SINCE THE DATE OF THIS PROSPECTUS OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED HEREBY, NOR DOES THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR UNDER ANY CIRCUMSTANCE IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents heretofore filed by POI with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), are incorporated in this
Prospectus by reference:

A. POI's Annual Report on Form 10-K for the year ended
September 30, 1995, as amended by Amendment No. 1 on Form 10-K/A filed
with the Commission on December 29, 1995;

B. POI's Quarterly Reports on Form 10-Q for the quarters
ended December 31, 1995 and March 31, 1996;

C. POI's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996, as amended by Amendment No. 1 on Form 10-Q/A
filed with the Commission on September 4, 1996;

D. POI's Current Reports on Form 8-K reporting events
dated December 18, 1995, May 23, 1996 and September 16, 1996;

E. POI's Current Report on Form 8-K reporting an event
dated June 7, 1996, as amended by an amendment on Form 8-K/A filed
with the Commission on July 2, 1996 and Amendment No. 2 on Form 8-K/A
filed with the Commission on August 27, 1996; and

F. The description of the Common Stock contained in
POI's Registration Statement on Form 8-A dated September 8, 1994.

All documents filed by POI pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of
filing of such document. Any statement contained in this Prospectus or in a
document incorporated or deemed incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
that also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.

POI will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, on the
written or oral request of such person, a copy of any or all of the documents
referred to above that have been or hereafter are incorporated by reference
herein (other than exhibits to such information, unless such exhibits are
specifically incorporated by reference into the information that this
Prospectus incorporates). Requests for copies should be directed to:
Protection One, Inc., 3900 S.W. Murray Boulevard, Beaverton, Oregon 97005,
Attn: Montgomery Cornell, Director of Investor Relations; telephone (503)
520-6019.

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<PAGE> 6
IN CONNECTION WITH ANY UNDERWRITTEN OFFERING OF THE COMMON STOCK, THE
UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICES OF THE COMMON STOCK OR OTHER SECURITIES OF THE COMPANY AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
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<S> <C>
Incorporation of Certain Information by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>

AVAILABLE INFORMATION

POI is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected without charge and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048, and Citicorp Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such materials may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and the Commission's public reference facilities in New York, New York,
and Chicago, Illinois at prescribed rates. The Commission also maintains a Web
Site at http://www.sec.gov. that contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
The Common Stock is traded on the Nasdaq National Market (Symbol: ALRM).
Reports, proxy statements and other information concerning POI also may be
inspected at the office of the National Association of Securities Dealers, Inc.
at 1735 K Street, N.W., Washington, D.C. 20006.

POI has filed with the Commission a Registration Statement on Form S-3
under the Securities Act with respect to the shares of Common Stock offered
hereby (including all amendments an supplements thereto, the "Registration
Statement"). This Prospectus, which forms a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement and the exhibits filed therewith, certain parts of which have been
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to POI and the Common Stock offered hereby,
referenced is made to the Registration Statement and the exhibits and schedules
thereto.

Statements contained in this Prospectus as to the contents of any
agreements, instrument or other document referred to are not necessarily
complete, and with respect to each such agreement, instrument or other document
filed as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of such document. Each such statement
is qualified in its entirety by such reference.

Protection One(R) is a trademark of Protection One, Inc.

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<PAGE> 7
THE COMPANY

Protection One, Inc. and its subsidiaries (collectively the "Company"
or "Protection One") provide security alarm monitoring services for residential
and small business subscribers. The Company monitors digital signals arising
from burglaries, fires and other events through security systems installed at
subscribers' premises. Most of these signals are received and processed at the
Company's central monitoring station located in Portland, Oregon. The Company
also sells enhanced security services, patrol and alarm response services and
alarm systems and provides local field repair services through 11 branch
offices. Enhanced security services provided by the Company include two-way
voice communication, supervised monitoring services, pager services, wireless
backup services and extended service protection. Based on the Company's
188,132 subscribers as of June 30, 1996 (approximately 80% of which are
residential), Protection One believes it is the fourth largest residential
security alarm monitoring company in the United States and the largest in the
six western states of Arizona, California, Nevada, New Mexico, Oregon and
Washington.

The Company's strategy is to enhance its position as the largest
residential security alarm monitoring company in the western United States by
pursuing a balanced growth plan incorporating the purchase of subscriber
accounts from independent security alarm systems dealers with whom the Company
has exclusive purchase agreements (the "Dealer Program"), acquisitions of
portfolios of subscriber accounts, the sale of enhanced security services and
new alarm systems and possible joint ventures and other strategic alliances.

The Company's executive offices are located at 6011 Bristol Parkway,
Culver City, California 90230 and its telephone number is 310-338-6930.

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<PAGE> 8
RISK FACTORS

This Prospectus and the materials incorporated by reference herein
contains certain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Forward looking statements are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy and some of
which might not even be anticipated. Future events and actual results could
differ materially from those set forth in or contemplated by the
forward-looking statements herein as a result of certain of the risk factors
set forth below and elsewhere in this Prospectus. In addition to the other
information set forth and incorporated by reference in this Prospectus, the
following risk factors should be considered carefully in evaluating an
investment in the Common Stock offered hereby:

Risks Related to High Leverage. The Company is highly leveraged. At
June 30, 1996, the Company's consolidated indebtedness was $207.1 million, and
POI's wholly owned subsidiary Protection One Alarm Monitoring, Inc.
("Monitoring") had unused borrowing capacity under its revolving credit
facility (the "Revolving Credit Facility") of $19.1 million. (POI is a holding
company with no operations of its own and no significant assets other than
POI's ownership of the capital stock of Monitoring.) As of June 30, 1996,
after giving effect to the offering and sale of Monitoring's 6-3/4% Convertible
Senior Subordinated Notes due 2003 (the "Convertible Notes") that were issued
on September 20, 1996 and the application of the net proceeds thereof, the
Company's consolidated indebtedness would have been $216.1 million (excluding
$1.2 million of contingent reimbursement obligations under outstanding letters
of credit), and Monitoring would have had unused borrowing capacity under the
Revolving Credit Facility of $100.0 million. Future additions of subscriber
accounts through the purchases from Company's independent dealers (the "Dealer
Program") and acquisitions of subscriber account portfolios will require
additional borrowings under Monitoring's revolving credit facility (the
"Revolving Credit Facility"), thereby further increasing the Company's
leverage. See "-- Risks Related to Acquisitions." All borrowings then
outstanding under the Revolving Credit Facility are currently due in full on
January 3, 2000. Although Monitoring believes that it will be able to obtain
further extensions of the maturity date of the Revolving Credit Facility from
time to time, or will be able to refinance the Revolving Credit Facility prior
to its present maturity date, there can be no assurance that Monitoring will be
able to do so. Monitoring will be required to make semiannual cash payments of
interest on the Convertible Notes of $3.0 million beginning March 15, 1997;
in addition, the principal amount of Monitoring's 13-5/8% Senior Subordinated
Discount Notes due 2005 (the "Discount Notes") will accrete in value until June
30, 1998, and Monitoring will be required to make cash payments of interest on
the Discount Notes beginning on December 31, 1998. Based on the Discount
Notes' interest rate of 13-5/8%, such interest payment will be $11.3 million
semiannually, or $22.6 million per year. There can be no assurance that
Monitoring's cash flows from operations will be sufficient to make the required
interest payments on the Convertible Notes, the Discount Notes and borrowings
under the Revolving Credit Facility.

The indentures pursuant to which the Convertible Notes and the
Discount Notes were issued (the "Convertible Notes Indenture" and the "Discount
Notes Indenture," respectively ) do not provide for any current amortization of
principal or require the establishment of any reserves or sinking funds in
respect of the payment of principal. As a result, Monitoring will be required
to repay the full principal amount of the Convertible Notes ($90.0 million, or
$103.5 million if the over-allotment option granted to initial underwriters of
the Convertible Notes is exercised in full) on September 15, 2003 and the full
principal amount of the Discount Notes ($166.0 million) on June 30, 2005.
There can be no assurance that Monitoring will have the cash necessary to repay
the Convertible Notes and the Discount Notes at maturity or will be able to
refinance such obligations.

Monitoring's ability to pay the principal of and interest on the
Convertible Notes and the Discount Notes and continue to service its other
indebtedness will be subject to various business, financial and other factors,
many of which are beyond the Company's control. In addition, each of the
Discount Notes Indenture, the agreement governing the Revolving Credit Facility
(the "Credit Agreement") and, to a lesser extent, the Convertible Notes
Indenture includes covenants that restrict the operational and financial
flexibility of the Company. Failure to comply with certain covenants would, in
some instances, permit the holders of the Convertible Notes or the Discount
Notes or the lenders under the Revolving Credit Facility

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to accelerate the maturity of Monitoring's obligations thereunder, and in other
instances could result in cross-defaults permitting the acceleration of all
such debt and debt under other agreements.

The Company's high degree of leverage may have important consequences
to holders of the Common Stock, including the following: (i) a substantial
portion of the Company's cash flow from operations is, and will continue to be,
dedicated to the payment of the principal of and interest on the Company's
indebtedness, thereby, reducing the funds available to the Company for its
operations and future growth or other business opportunities; (ii) the
Company's ability to obtain additional financing in the future for working
capital, the Dealer Program, acquisitions of portfolios of subscriber accounts,
capital expenditures, general corporate purposes or other purposes may be
impaired; (iii) the Convertible Notes Indenture, the Discount Notes Indenture
and the Credit Agreement contain, and are expected to continue to contain,
certain restrictive covenants, including certain covenants that require the
Company to obtain the consent of the lenders under the Revolving Credit
Facility and to maintain certain financial ratios in order to undertake
significant acquisitions of portfolios of subscriber accounts; (iv)
Monitoring's borrowings under the Revolving Credit Facility are at floating
rates of interest, causing the Company to be vulnerable to increases in
interest rates; (v) the Company will be more vulnerable to a downturn in the
Company's business or the economy generally; and (vi) the Company's ability to
compete against other less leveraged companies may be adversely affected.

Risks Related to Acquisitions. A principal element of the Company's
business strategy is to acquire portfolios of alarm monitoring accounts.
During the fiscal 1992-1995 period, the Company completed 87 acquisitions of
the portfolios of subscriber accounts of other alarm service companies, and
those acquisitions were the primary source of the Company's growth during that
period. Although the Dealer Program is anticipated to be an increasingly
important component of the Company's growth, an additional 27 portfolios of
subscriber accounts were acquired during the first nine months of fiscal 1996,
and acquisitions of portfolios of subscriber accounts are expected to continue.
The Company faces competition for the acquisition of portfolios of subscriber
accounts, and may be required to offer higher prices for acquired accounts than
the Company has in the past. See "--Competition." In addition, due to the
continuing consolidation of the security alarm industry and the acquisition by
the Company and other alarm companies of a number of large portfolios of
subscriber accounts, there may in the future be fewer large portfolios of
subscriber accounts available for acquisition. There can be no assurance that
the Company will be able to find acceptable acquisition candidates or, if such
candidates are identified, that acquisitions can be consummated on terms
acceptable to the Company.

Acquisitions of portfolios of subscriber accounts involve a number of
special risks, including the possibility of unanticipated problems not
discovered prior to the acquisition, account attrition and the diversion of
management's attention from other business activities in order to focus on the
assimilation of accounts. For acquisitions that are structured as the purchase
of the stock of other alarm companies, the Company may assume unexpected
liabilities and must dispose of the unnecessary assets of the acquired
companies.

Because the Company's primary consideration in acquiring a portfolio
of subscriber accounts is the amount of cash flow that can be derived from the
monthly recurring revenue ("MRR") associated with the purchased accounts, the
price paid by the Company is customarily directly tied to such MRR. The price
paid varies based on the number and quality of accounts being purchased from
the seller, the historical activity of such accounts and other factors. The
seller typically does not have audited historical financial information with
respect to the acquired accounts; thus, in making acquisitions the Company
generally has relied on management's knowledge of the industry, due diligence
procedures and representations and warranties of the sellers. There can be no
assurance that such representations and warranties are true and complete or, if
such representations and warranties are inaccurate, that the Company will be
able to recover damages from the seller in an amount sufficient to fully
compensate the Company for any resulting losses. The Company expects that
future acquisitions will present at least the same risks to the Company as its
prior acquisitions.

An important aspect of the Company's acquisition program is the
assimilation of subscriber accounts into the Company's operations after
purchase. Depending on the size, frequency and location

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of acquisitions, the assimilation of subscribers may adversely affect the
provision of field repair services to existing subscribers, which may cause
subscriber attrition to increase. In addition, if the Company's corporate or
branch operations fail to assimilate a substantial portion of acquired
subscriber accounts, the Company may experience higher attrition in the future.

History of Losses. The Company incurred losses attributable to common
stock of $11.3 million for the nine months ended June 30, 1996, $18.5 million
for fiscal 1995, $9.2 million for fiscal 1994, $4.6 million for fiscal 1993 and
$5.0 million for fiscal 1992. ("Losses attributable to common stock" means the
Company's net loss, less dividends payable on preferred stock.) These losses
reflect, among other factors, the substantial charges incurred by the Company
for amortization of purchased subscriber accounts, interest incurred on the
Company's indebtedness and extraordinary losses on early extinguishment of
debt. Such charges, with the exception of the extraordinary losses, will
increase as the Company continues to purchase subscriber accounts, if the
Company's indebtedness increases, or if interest rates increase. The Company's
earnings have been insufficient to cover its fixed charges since the Company
was formed, and there can be no assurance that the Company will attain
profitable operations.

Risks Related to the Dealer Program. During fiscal 1995 and the first
nine months of fiscal 1996, the Company increased its emphasis on the Dealer
Program, which became a more significant source of growth than in prior years.
The Company expects that this emphasis will continue. Several of the Company's
competitors also have dealer programs, and there can be no assurance that the
Company will be able to retain or expand its current dealer base or that
competitive offers to the Company's dealers will not require the Company to pay
higher prices to the Company's dealers for subscriber accounts than previously
paid. The Company's five highest producing dealers generated 47.0% of the
total subscriber accounts purchased by the Company through the Dealer Program
in the first nine months of fiscal 1996. The loss of any of such dealers would
negatively impact the Company's subscribers, revenues and cash flows from
operations.

Need for Additional Capital. In fiscal 1995 and the first nine months
of fiscal 1996, the Company invested a total of $138.9 million in acquisitions
of portfolios of subscriber accounts and purchases of subscriber accounts
through the Dealer Program. Net cash provided by operating activities totaled
$25.1 million during such period, and the Company used borrowings under the
Revolving Credit Facility and proceeds from offerings of debt and equity
securities to fund the remainder of the Company's investing activities. The
Company intends to continue to pursue subscriber account growth through the
Dealer Program and acquisitions. As a result, the Company will be required to
seek additional funding from additional borrowing under the Revolving Credit
Facility and the sale of additional securities in the future, which may lead to
higher leverage or the dilution of then existing holders' investment in the
Common Stock. See "--Risks Related to High Leverage." Any inability of the
Company to obtain funding through external financings is likely to adversely
affect the Company's ability to increase its subscribers, revenues and cash
flows from operations. There can be no assurance that external funding will be
available to the Company on attractive terms or at all.

Management of Growth. The Company's business strategy is to grow
rapidly through the addition of subscriber accounts. This expansion has placed
and will continue to place substantial demands on the Company's management and
operational resources and system of financial and internal controls. The
Company's future operating results will depend in part on the Company's ability
to continue to implement and improve the Company's operating and financial
controls and to expand, train and manage the Company's employee base.
Significant changes in quarterly revenues and costs may result from the
Company's execution of its business strategy, resulting in fluctuating
financial results. Additionally, management of growth may limit the time
available to the Company's management to attend to other operational, financial
and strategic issues.

Attrition of Subscriber Accounts. The Company experiences attrition
of subscriber accounts as a result of, among other factors, relocation of
subscribers, adverse financial and economic conditions, and competition from
other alarm service companies. In addition, the Company loses certain
accounts, particularly acquired accounts, to the extent the Company does not
service those accounts adequately or does not assimilate new accounts into the
Company's operations. An increase in such attrition could have a material
adverse effect on the Company's revenues and earnings.

7
<PAGE> 11
When acquiring accounts, the Company seeks to withhold a portion of
the purchase price as a partial reserve against excess subscriber attrition.
If the actual attrition rate for the accounts acquired is greater than the rate
assumed by the Company at the time of the acquisition, and the Company is
unable to recoup its damages from the portion of the purchase price held back
from the seller, such attrition could have a material adverse effect on the
Company's financial condition or results of operations. There can be no
assurance that the Company will be able to obtain purchase price holdbacks in
future acquisitions, particularly acquisitions of large portfolios. The
Company is not aware of any reliable historical data relating to account
attrition rates prepared by companies from whom the Company has acquired
accounts, and the Company has no assurance that actual account attrition for
acquired accounts will not be greater than the attrition rate assumed or
historically incurred by the Company. In addition, because some acquired
accounts are prepaid on an annual, semiannual or quarterly basis, attrition may
not become evident for some time after an acquisition is consummated.

At June 30, 1996, the cost of subscriber accounts and intangible
assets, net of previously accumulated amortization, was $238.9 million, which
constituted 87.1% of the book value of the Company's total assets. The
Company's purchased subscriber accounts are amortized on a straight-line basis
over the estimated life of the related revenues. To estimate such life, the
Company first determines gross subscriber attrition, defined by the Company for
a period as a quotient, the numerator of which is equal to the number of
subscribers who disconnect services during such period and the denominator of
which is the average of the number of subscribers at each month end during such
period. Gross subscriber attrition was 18.6% and 19.9% for the twelve months
ended June 30, 1995 and 1996, respectively. The Company offsets gross
attrition by adding new accounts from subscribers who move into premises
previously occupied by Company subscribers and in which security alarm systems
are installed, conversions of accounts that were previously monitored by other
alarm companies to the Company's monitoring services and accounts for which the
Company obtains a guarantee from the seller that provides for the Company to
"put" back to the seller canceled accounts. The resulting figure is used as a
guideline to determine the estimated life of subscriber revenues. It is the
Company's policy to review periodically actual account attrition and, when
necessary, adjust the remaining estimated lives of the Company's purchased
accounts to reflect assumed future attrition. In fiscal 1993, the Company made
such an adjustment to the estimated life of subscriber accounts, reducing such
estimated life from 12 years to 10 years. There could be a material adverse
effect on the Company's results of operations and financial condition if actual
account attrition significantly exceeds assumed attrition and the Company has
to make further adjustments with respect to the amortization of purchased
subscriber accounts.

Impact of Accounting Differences for Account Purchases and New
Installations. A difference between the accounting treatment of the purchase
of subscriber accounts (including both purchases of subscriber account
portfolios and purchases under ongoing agreements with independent alarm
dealers) and the accounting treatment of the generation of subscriber accounts
through direct sales by the Company's sales force has a significant impact on
the Company's results of operations. All direct external costs associated with
purchases of subscriber accounts are capitalized and amortized over 10 years on
a straight-line basis. Also included in capitalized costs are certain
acquisition transition costs that reflect the Company's estimate of costs
associated with incorporating the purchased subscriber accounts into the
Company's operations. Such costs include costs incurred by the Company in
fulfilling the seller's pre-acquisition obligations to the acquired
subscribers, such as providing warranty repair services. In contrast, all of
the Company's costs related to the marketing, sales and installation of new
alarm monitoring systems generated by the Company's sales force are expensed in
the period in which such activities occur. The Company's marketing, sales and
installation expenses for new systems generally exceed installation revenues.

The Company's purchase activity increased significantly during fiscal
1994, fiscal 1995 and the first nine months of fiscal 1996. See "--Risks
Related to Acquisitions." In addition, during those periods the Company reduced
the Company's sales of new systems and related marketing expenditures. As a
result of the difference in the methods by which such activities are accounted
for, the combined effect of these two factors was to improve operating results
during fiscal 1994, fiscal 1995 and the first nine months of fiscal 1996. The
Company does not expect to further reduce sales of new systems by Company
personnel and related marketing expenditures in the remainder of fiscal 1996 or
in fiscal 1997. There can be no assurance that the Company will not increase
its emphasis on the marketing and sales of new alarm system

8
<PAGE> 12
installations in the future, particularly in connection with a joint venture or
other strategic alliance; any such increase could adversely affect results of
operations. The Company anticipates that subscriber accounts added through the
co-branded program with PacifiCorp will be purchased through the Dealer Program
rather than generated through sales of new alarm systems by Company personnel.

Possible Adverse Effect of "False Alarm" Ordinances. According to
certain data concerning the residential security alarm market prepared in
December 1995 by J.P. Freeman & Co. (the "Freeman Data"), approximately 97% of
alarm activations that result in the dispatch of police or fire department
personnel are not emergencies, and thus are "false alarms." Significant concern
has arisen in certain municipalities about this high incidence of false alarms.
This concern could cause a decrease in the likelihood or timeliness of police
response to alarm activations and thereby decrease the propensity of consumers
to purchase or maintain alarm monitoring services.

A number of local governmental authorities have considered or adopted
various measures aimed at reducing the number of false alarms. Such measures
include (i) subjecting alarm monitoring companies to fines or penalties for
transmitting false alarms, (ii) licensing individual alarm systems and the
revocation of such licenses following a specified number of false alarms, (iii)
imposing fines on alarm subscribers for false alarms, (iv) imposing limitations
on the number of times the police will respond to alarms at a particular
location after a specified number of false alarms, and (v) requiring further
verification of an alarm signal before the police will respond. Enactment of
such measures could adversely affect the Company's future business and
operations.

Possible Adverse Effect of Future Government Regulations, Risks of
Litigation. The Company's operations are subject to a variety of laws,
regulations and licensing requirements of federal, state and local authorities.
In certain jurisdictions, the Company is required to obtain licenses or
permits, to comply with standards governing employee selection and training,
and to meet certain standards in the conduct of the Company's business. The
loss of such licenses, or the imposition of conditions to the granting or
retention of such licenses, could have a material adverse effect on the
Company.

The Company's advertising and sales practices are regulated by both
the Federal Trade Commission and state consumer protection laws. Such
regulations include restrictions on the manner in which the Company promotes
the sale of security alarm systems and the obligation of the Company to provide
purchasers of alarm systems with certain rescission rights. While the Company
believes that it has complied with these regulations in all material respects,
there can be no assurance that none of these regulations was violated in
connection with the solicitation of the Company's existing subscriber accounts,
particularly with respect to accounts acquired from third parties, or that no
such violation will occur in the future.

From time to time, subscribers have submitted complaints to state and
local authorities regarding the Company's sales and billing practices, which in
some instances have resulted in discussions with, or actions by, such
authorities. In August 1994, as a result of certain complaints by subscribers,
three California governmental authorities brought an action against the
Company, and concurrently settled such action. In connection with the
settlement of such action, the Company agreed to the filing of an injunction
requiring the Company to provide notices of certain increases in charges for
its services and to comply with certain restrictions in its marketing, billing
and collection activities, and paid restitution to subscribers in the amount of
$31,000 and civil penalties of $30,000. Any violation by the Company of the
terms of such injunction could have a material adverse effect on the Company.

The Company does not believe that any of the investigations or actions
described herein has had or will have a material adverse effect on the Company.
However, there can be no assurance that other actions that may be taken in the
future by these or other authorities as a result of subscriber complaints will
not have such adverse effect on the Company.

Risks of Liability from Operations. The nature of the services
provided by the Company potentially exposes it to greater risks of liability
for employee acts or omissions or system failure than may be inherent in other
businesses. Most of the Company's alarm monitoring agreements and other
agreements pursuant

9
<PAGE> 13
to which the Company sells its products and services contain provisions
limiting liability to subscribers in an attempt to reduce this risk. However,
in the event of litigation with respect to such matters there can be no
assurance that these limitations will be enforced, and the costs of such
litigation could have an adverse effect on the Company.

The Company's alarm response and patrol services require Company
personnel to respond to emergencies that may entail risk of harm to such
employees and to others. In most cities in which the Company provides such
services, the Company's patrol officers carry firearms, which may increase such
risk. Although the Company screens and trains its employees, the provision of
alarm response service subjects the Company to greater risks related to
accidents or employee behavior than other types of businesses. Reduction of
police participation in the handling of emergencies could expose the Company's
patrol officers to greater hazards and further increase the Company's risk of
liability.

The Company carries insurance of various types, including general
liability and errors and omissions insurance providing coverage of $15.0
million on both an aggregate and a per claim basis. The loss experience of the
Company and other security service companies may affect the availability and
cost of such insurance. Certain of the Company's insurance policies and the
laws of some states may limit or prohibit insurance coverage for punitive or
certain other types of damages, or liability arising from gross negligence.

Geographic Concentration. The Company's existing subscriber base is
geographically concentrated in certain metropolitan areas and surrounding
suburbs in the six western states in which the Company operates. Accordingly,
the performance of the Company may be adversely affected by regional or local
economic conditions.

As a result of acquisitions or strategic alliances, the Company may
from time to time expand its operations into regions outside of the Company's
current operating area. The acquisition of subscriber accounts in other
regions, or in metropolitan areas in which the Company does not currently have
subscribers, requires an investment by the Company in local branches and
personnel necessary to service such accounts. In order for the Company to
expand successfully into a new area, the Company must obtain a sufficient
number, and density, of subscriber accounts in such area to support the
additional investment. There can be no assurance that an expansion into new
geographic areas would generate operating profits.

Competition. The security alarm industry is highly competitive and
highly fragmented. The Company competes with larger national companies, as
well as smaller regional and local companies, in all of the Company's
operations. Furthermore, new competitors are continuing to enter the industry
and the Company may encounter additional competition from such future industry
entrants.

Certain of the Company's current competitors have, and new competitors
may have, greater financial resources than the Company. In addition, other
alarm services companies have adopted a strategy similar to the Company's that
entails the aggressive purchase of alarm monitoring accounts both through
acquisitions of account portfolios and through dealer programs. Some of these
companies may be willing to offer higher prices than the Company is prepared to
offer to purchase subscriber accounts. The effect of such competition may be
to reduce the purchase opportunities available to the Company, thus reducing
the Company's rate of growth, or to increase the price paid by the Company for
subscriber accounts, which would adversely affect the Company's return on
investment in such accounts and the Company's results of operations.

Dependence Upon Senior Management. The success of the Company's
business is largely dependent upon the active participation of the Company's
executive officers. The loss of the services of one or more of such officers
for any reason may have a material adverse effect on the Company's business.

Effect of Change of Control, Fundamental Change and Delaware
Anti-takeover Law. At the option of the holders of the Convertible Notes,
Monitoring is required to purchase the Convertible Notes at a price initially
equal to 106.75% of the principal amount thereof plus accrued and unpaid
interest upon the

10
<PAGE> 14
occurrence of any "Fundamental Change" as defined in the Convertible Notes
Indenture. In addition, Monitoring is required to make an offer to purchase
all of the Discount Notes at a price equal to 101% of their Accreted Value (as
defined in the Discount Notes Indenture) on any repurchase date prior to June
30, 1998, or at a purchase price equal to 101% of the principal amount thereof
plus accrued and unpaid interest to any repurchase date on or after June 30,
1998, upon the occurrence of any "Change of Control" as defined in the Discount
Notes Indenture. A "Fundamental Change" and a "Change of Control" also
constitute events of default under the Revolving Credit Facility. If such an
event were to occur, the Company may not be able to repay all of its
obligations that would then become payable. Such provisions, together with
certain provisions of Delaware law, could delay or prevent a change in control
of the Company, could discourage acquisition proposals and could diminish the
opportunities for a stockholder to participate in tender offers, including
tender offers at a price above the then current market value of the Common
Stock or over a stockholder's cost basis in the Common Stock. In addition, the
Board of Directors, without further stockholder approval, may issue preferred
stock, which could have the effect of delaying, deferring or preventing a
change in control of POI. The issuance of preferred stock could also adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others.

Shares Eligible for Future Sale. Of the 12,914,783 shares of Common
Stock outstanding at September 30, 1996, 9,799,610 shares were freely tradeable
in the public market without any restriction whatsoever, and an additional
3,115,173 shares were eligible for sale subject to the volume limitations of
Rule 144 under the Securities Act. In addition, as of September 30, 1996, (i) an
aggregate of 5,013,928 shares of Common Stock were issuable after December 19,
1996 upon conversion of the Convertible Notes at a conversion price of $17.95
per share, (ii) an aggregate of 1,351,158 shares were issuable upon the exercise
of outstanding warrants with a weighted average exercise price of $3.19 per
share, and (iii) an aggregate of 1,272,060 shares were issuable upon the
exercise of outstanding options and management performance warrants with a
weighted average exercise price of $5.79 per share, all of which shares are
currently registered for sale or resale under the Securities Act. Certain
stockholders of the Company also have certain demand and "piggyback"
registration rights pursuant to a stockholder's agreement among such
stockholders and POI. Sales and potential sales of substantial amounts of Common
Stock in the public market could adversely affect the prevailing market price of
the Common Stock.

Dividend Policy, Restrictions on Dividends. POI has never paid any
cash dividends on the Common Stock and does not intend to pay any cash
dividends in the foreseeable future. POI is dependent upon the receipt of
dividends or other distributions from Monitoring to fund POI's operations, and
the Credit Agreement and the Discount Notes Indenture restrict POI's ability to
declare or pay any dividend on, or make any other distribution in respect of,
the Common Stock and do not permit distributions from Monitoring to POI other
than for certain specified purposes.

Possible Volatility of Prices of the Common Stock. The stock market
has from time to time experienced extreme price and volume fluctuations that
have been unrelated to the operating performance of particular companies. The
market prices of the Common Stock may be significantly affected by quarterly
variations in the Company's operating results, litigation involving the
Company, general trends in the security alarm industry, actions by governmental
agencies, national economic and stock market conditions, industry reports and
other factors, many of which are beyond the control of the Company. Due to all
of the foregoing factors, it is likely that the Company's operating results
will fall below the expectations of the Company, securities analysts or
investors in some future quarter. In such event, the trading price of the
Common Stock would likely be materially and adversely affected.

11
<PAGE> 15
THE ACQUISITIONS

Pursuant to an Agreement and Plan of Reorganization dated as of
September 30, 1996 (the "Alltec Acquisition Agreement"), by and among Monitoring
and the shareholders of Alltec, on September 30, 1996 Monitoring acquired the
security alarm accounts, accounts receivable, telephone lines and certain other
assets of Alltec (the "Alltec Acquisition"). In consideration of the Alltec
Acquisition, Monitoring paid an aggregate of $0.7 million of Alltec's
indebtedness, assumed certain operating obligations of Alltec and delivered to
Alltec an aggregate of 167,647 shares of POI Common Stock; in addition,
Monitoring agreed to deliver to Alltec (i) up to 24,765 additional shares of
POI Common Stock in October 1997, depending upon the actual postclosing
attrition rate for the acquired accounts, and (ii) up to 9,500 additional shares
of POI Common Stock if Monitoring acquires from Alltec prior to January 30, 1997
certain subscriber accounts generated after the closing of the Alltec
Acquisition.

Pursuant to an Agreement for Stock Purchase dated as of October 4,
1996, by and among Monitoring and the stockholders of Security Holdings (the
"Security Holdings Purchase Agreement"), on October 4, 1996 Monitoring acquired
all of the outstanding shares of capital stock of Security Holdings (the
"Security Holdings Acquisition"). In consideration of the Security Holdings
Acquisition, Monitoring delivered an aggregate of 482,903 shares of Common Stock
to the former shareholders of Security Holdings. An additional 68,985 shares of
Common Stock have been placed in an escrow account and will be delivered to the
former shareholders of Security Holdings in June, 1997 if the actual postclosing
attrition rate of the Security Holdings alarm accounts does not exceed an
assumed rate reflected in the Security Holdings Purchase Agreement. Prior to
the acquisition, Security Holdings also was engaged in the business of providing
security alarm monitoring services to residential and commercial subscribers.

In connection with the acquisitions, POI and the Selling Stockholders
entered into Registration Rights Agreements (the "Registration Rights
Agreements") that provide for the filing of the Registration Statement of which
this Prospectus is a part. Each Registration Rights Agreement also prohibits
any sale of the Shares issued to a Selling Stockholder party thereto prior to
October 17, 1996, limits the volume of Shares that may be sold by such Selling
Stockholder between October 17, 1996 and January 6, 1997, and contains certain
other restrictions on sales of the Shares when POI is engaged in or preparing to
engage in an underwritten public offering of POI's securities.

USE OF PROCEEDS

The Company will not receive any proceeds from the sale from time to
time of the shares of Common Stock offered hereby. All proceeds from the sale
of the Shares will be for the account of the Selling Stockholders, as described
below. See "Selling Stockholders" and "Plan of Distribution."

12
<PAGE> 16
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of Protection One consists of 24,000,000
shares of Common Stock and 5,000,000 shares of preferred stock, par value $.10
per share ("Preferred Stock").

COMMON STOCK

As of September 30, 1996, there were 12,914,783 shares of Common Stock
issued and outstanding.

Each share of Common Stock entitles the holder of record thereof to
cast one vote on all matters submitted for a vote of stockholders. The holders
of Common Stock do not possess cumulative voting rights, and members of the
Board of Directors of POI are elected by a plurality vote. As a result, the
holders of a majority of outstanding shares of Common Stock voting for the
election of directors of POI can elect all directors then being elected.

Each share of Common Stock has an equal and ratable right to receive
such dividends as may be declared by the Board of Directors of POI out of funds
legally available therefor, subject to the rights of the holder(s) of any one
or more series of Preferred Stock then outstanding.

Upon the liquidation, dissolution or winding up of POI, the assets of
POI legally available for distribution to stockholders are distributable
equally and ratably among the holders of Common Stock, subject to prior
distribution rights of creditors of POI and to the preferential rights of the
holders of any one or more series of Preferred Stock then outstanding.

The holders of shares of Common Stock have no preemptive,
subscription, redemption or conversion rights and are not liable for further
calls or assessments. All outstanding shares of Common Stock are fully paid
and nonassessable.

The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, Seattle, Washington.

PREFERRED STOCK

POI is authorized to issue up to an aggregate of 5,000,000 shares of
Preferred Stock in such series and with such designations, rights and
preferences as may be determined from time to time by the Board of Directors of
POI. Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue Preferred Stock with dividend, liquidation, conversion,
voting or other rights that could adversely affect the voting power or other
rights of the holders of the Common Stock. In the event of such issuance, the
Preferred Stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of POI. As of the
date of this Prospectus, there are no shares of Preferred Stock outstanding,
and POI has no present intention to issue any additional such shares.

DELAWARE ANTI-TAKEOVER LAW

POI is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law. Pursuant to Section 203, certain "business
combinations" (as defined) between a Delaware corporation and an "interested
stockholder" (defined generally as a stockholder who becomes the beneficial
owner of 15% or more of a Delaware corporation's outstanding voting stock) are
prohibited for three years following the date such stockholder became an
interested stockholder, unless: (i) the corporation has elected in its
certificate of incorporation not to be governed by Section 203; (ii) the
business combination or the transaction in which the interested stockholder
became an interested stockholder was approved by the corporation's board of
directors before the other party to the business combination became an
interested stockholder; (iii) upon consummation of the transaction that
resulted in the interested stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding voting
stock owned by

13
<PAGE> 17
directors who are also officers of the corporation or held in employee benefit
plans that do not provide employees a confidential right to determine whether
to tender (or how to vote) stock held by the plan; or (iv) the business
combination was approved by the board of directors of the corporation and by
the holders of two-thirds of the outstanding voting stock of the corporation
not owned by the interested stockholder. The three-year prohibition also does
not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an "interested
stockholder," transactions with an "interested stockholder" involving the
assets or stock of the corporation or its majority-owned subsidiaries and
transactions that increase an interested stockholder's percentage ownership of
stock. The provisions of Section 203 requiring a "supermajority" vote to
approve certain corporate transactions could enable certain of the Company's
stockholders to exercise veto power over such transactions.

SELLING STOCKHOLDERS

The following table sets forth the number of shares of Common Stock
beneficially owned by the Selling Stockholders as of October 4, 1996, the
number of shares of Common Stock offered hereby and the number of shares, and
percentage of the outstanding shares, of Common Stock to be owned by each
Selling Stockholder after such offering if all of the shares offered hereby are
sold as described herein:

<TABLE>
<CAPTION>
Percentage
Number of Shares Number Number of of Outstanding
Owned Prior of Shares Shares Owned Shares Owned
Selling Stockholder to Offering Being Offered After Offering After Offering
- ------------------- ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Sequence Systems, Inc. 201,912 1 201,912 1 0 *

Herbert H. Warrick, Jr.
and Ramona Warrick 264,202 2 264,202 2 0 *

Russell E. VanDevanter 247,029 3 247,029 3 0 *

Maria VanDevanter 40,657 4 40,657 4 0 *
--------- ---------
- --------------------
</TABLE>

* Less than one percent.

1 Includes 24,765 Shares issuable in October 1997 if certain assumed
attrition rates with respect to the alarm accounts acquired from
Alltec are not exceeded and 9,500 shares issuable if certain
additional alarm accounts are acquired. See "The Acquisitions."

2 Includes 33,025 Shares held in an escrow account. See "The
Acquisitions."

3 Includes 30,878 Shares held in an escrow account. See "The
Acquisitions."

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<PAGE> 18
4 Includes 5,082 Shares held in an escrow account. See "The
Acquisitions."

The preceding table has been prepared based upon information furnished
to the Company by or on behalf of the Selling Stockholders. Other than as a
stockholder of Security Holdings prior to the Security Holdings Acquisition (in
the case of each Selling Stockholder other than Alltec), none of the Selling
Stockholders has had any material relationship with the Company within the
three-year period ending on the date of this Prospectus.

PLAN OF DISTRIBUTION

The Selling Stockholders may from time to time after October 16, 1996
sell the shares of Common Stock covered by this Prospectus in one or more of
the following transactions: (a) to underwriters who will acquire the shares for
their own account and resell such shares in one or more transactions, including
negotiated transactions, at a fixed price or at varying prices determined at
the time of sale, with any initial public offering price and any discount or
concession allowed or re-allowed or paid to dealers subject to change from time
to time; (b) through brokers or dealers, acting as principal or agent, in
transactions (which may involve block transactions) on the Nasdaq National
Market in ordinary brokerage transactions, in negotiated transactions or
otherwise, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices, at negotiated prices or otherwise (including
without limitation sales in transactions that comply with the volume and manner
of sale provisions contained in paragraphs (e) and (f) of Rule 144 under the
Securities Act ("Rule 144")); or (c) directly or indirectly through brokers or
agents in private sales at negotiated prices, or in any combination of such
methods of sale. This Prospectus may be supplemented or amended from time to
time to describe a specific plan of distribution.

In connection with distributions of the shares of Common Stock covered
hereby or otherwise, the Selling Stockholders may enter into hedging
transactions with broker-dealers or other financial institutions. In
connection with such transactions, broker-dealers or other financial
institutions may engage in short sales of Common Stock in the course of hedging
the positions they assume with Selling Stockholders. The Selling Stockholders
may also sell Common Stock short and redeliver the shares to close out such
short positions. The Selling Stockholders may also enter into option or other
transactions with broker-dealers or other financial institutions that require
the delivery to such broker- dealer or other financial institution of the
Common Stock offered hereby, which Common Stock such broker-dealer or other
financial institution, subject to any applicable transfer restrictions in
agreements between the Selling Stockholder and the Company, may resell pursuant
to this Prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders may also pledge the shares registered hereunder to a
broker-dealer or other financial institution and, upon a default, such
broker-dealer or other financial institution may, subject to the transfer
restrictions contained in the Registration Rights Agreements, effect sales of
the pledged Common Stock pursuant to this Prospectus (as supplemented or
amended to reflect such transaction). In addition, any securities covered by
this Prospectus that qualify for sale pursuant to Rule 144 may be sold under
Rule 144 rather than pursuant to this Prospectus.

Underwriters participating in any offering may receive underwriting
discounts and commissions, discounts or concessions may be allowed or
re-allowed or paid to dealers, and brokers or agents participating in such
transactions may receive brokerage or agent's commissions or fees, all in
amounts to be negotiated in connection with sales pursuant hereto. The
underwriter, agent or dealer utilized in the sale of Common Stock will not
confirm sales to accounts of which such persons exercise discretionary
authority. In effecting sales of the Shares, brokers or dealers engaged by the
Selling Stockholders may arrange for other brokers or dealers to participate.
Brokers or dealers may receive compensation in the form of commissions or
discounts from Selling Stockholders and may receive commission from the
purchases of Shares for whom such broker-dealers may act as agents, all in
amounts to be negotiated, including immediately prior to the sale.

15
<PAGE> 19
The Selling Stockholders and all underwriters, dealers or agents, if
any, who participate in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any profit on the sale of such Shares by such stockholders, and all
discounts, commissions or concessions received by such underwriters, dealers or
agents, if any (whether received from the Selling Stockholders and/or from the
purchasers of the Shares for whom those dealers or agents may act as agents),
may be deemed to be underwriting discounts and commissions under the Securities
Act.

Certain of the above-described underwriters, dealers, brokers or
agents may engage in transactions with, or perform services for, with the
Company and its affiliates in the ordinary course of business.

Upon POI being notified by a Selling Stockholder that any arrangement
has been entered into with a broker-dealer for the sale of Shares through a
block trade, special offering or secondary distribution or a purchase by a
broker-dealer, to the extent required by applicable law, a supplement to this
Prospectus will be distributed that will set forth the name of each such
Selling Stockholder and of the participating underwriters, dealers or agents,
the aggregate amount of Shares being offered and the terms of the offering,
including all underwriting discounts, commissions and other items constituting
compensation from, and the resulting net proceeds to, the Selling Stockholders,
all discounts, commissions or concessions allowed or re-allowed or paid to
dealers, if any, and, if applicable, the purchase price to be paid by any
underwriter for shares of Common Stock purchases from the Selling Stockholder.

The Selling Stockholders and other persons participating in the
distribution of the Shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations of the Commission thereunder,
including, without limitation, Rules 10b-2, 10b-5, 10b-6 and 10b-7, which
provisions may limit the timing of the purchase and sale of shares of Common
Stock by the Selling Stockholders.

POI will pay all of the expenses incident to this offering other than
commissions, discounts, transfer taxes and fees (including attorneys' fees) of
third parties employed by a Selling Stockholder.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for POI by Mitchell, Silberberg & Knupp LLP, Los
Angeles, California.

EXPERTS

The consolidated balance sheets of Protection One, Inc. and
subsidiaries as of September 30, 1995 and 1994 and the related consolidated
statements of operations, cash flows and changes in stockholders' equity
(deficit) for each of the three years in the period ended September 30, 1995
incorporated by reference in this Prospectus, have been incorporated herein in
reliance on the report, which includes an explanatory paragraph with respect to
a change in method of accounting for certain subscriber account acquisition and
transition costs, of Coopers & Lybrand L.L.P., independent accountants, given
on the authority of that firm as experts in accounting and auditing.

The consolidated financial statements of Metrol Security Services, Inc.
and its subsidiaries as of December 31, 1995, 1994 and 1993, and for each of the
years in the three-year period ended December 31, 1995, have been included
herein and in the Registration Statement in reliance on the report of KPMG Peat
Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.

16
<PAGE> 20
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

Nature of Expense

<TABLE>
<S> <C>
SEC Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,297.48
Legal (Including blue sky) fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000.00
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500.00
----------
Total $10,797.48
=========
</TABLE>
All of the foregoing expenses other than the SEC registration fee are
estimates.

Item 15. Indemnification of Directors of and Officers.

Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") provides that a corporation has the power to indemnify a director,
officer, employee or agent of the corporation and certain other persons serving
at the request of the corporation in related capacities against amounts paid
and expenses incurred in connection with an action or proceeding to which he is
or is threatened to be made party by reason of such position, if such person
shall have acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, and, in any criminal
proceeding, if such person had no reasonable cause to believe his conduct was
unlawful, provided that, in the case of actions brought by or in the right of
the corporation, no indemnification shall be made with respect to any matter as
to which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the adjudicating court determines that such
indemnification is proper under the circumstances. The Fifth Amended and
Restated Certificate of Incorporation of the Registrant, as amended (the
"Certificate of Incorporation") provides that the Registrant shall indemnify
its directors and officers to the fullest extent permitted the DGCL.

The Certificate of Incorporation also provides, as permitted by
Section 102(b) of the DGCL, that no director shall be liable to the Registrant
or its stockholders for monetary damages for breach of his fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Registrant 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 Delaware General Corporation Law or (iv)
for any transaction in which the director derived an improper personal benefit.

The By-laws of the Registrant contain provisions to the effect that
each director, officer and employee of the Registrant shall be indemnified by
the Registrant against liabilities and expenses in connection with any legal
proceedings to which he may be made a party or with which he may become
involved or threatened by reason of having been an officer, director or
employee of the company or of any other organization at the request of the
company. The provisions include indemnification with respect to matters
covered by a settlement. Under Delaware law, any such indemnification shall be
made only if the Board determines by a majority vote of a quorum consisting of
disinterested directors (or, if such quorum is not obtainable, or if the Board
of Directors directs, by independent legal counsel) or by stockholders, that
indemnification is proper in the circumstances because the person seeking
indemnification has met the applicable standards of conduct. In addition, it
must be determined that the director, officer or employee acted in good faith
with the reasonable belief that his action was in or not opposed to the best
interests of the company, and, with respect to any criminal action or
proceeding, that he had no reasonable cause to believe his conduct was
unlawful.

The Registrant maintains a director and officer liability insurance
policy providing for the insurance on behalf of any person who is or was a
director or officer of the Registrant and subsidiary companies against any
liability incurred by such person in any such capacity or arising out of such
person's status as such. The insurer's limit of liability under the policy is
$5 million in the aggregate for all

II-1
<PAGE> 21
insured losses. The policy contains various reporting requirements and is
subject to certain exclusions and limitations.

Item 16. Exhibits.

<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
2.1 Agreement and Plan of Reorganization dated as of September 30, 1996,
among Protection One Alarm Monitoring, Inc. ("Monitoring"), Sequence
Systems, Inc. ("Sequence Systems") and the stockholders of Sequence
Systems

2.2 Agreement for Stock Purchase dated as of October 4, 1996, among
Monitoring and the stockholders of Security Holdings, Inc. ("Security
Holdings)

4.1 Fifth Restated Certificate of Incorporation of POI, as amended (1)

4.2 Bylaws of POI, as amended (2)

4.3 Registration Rights Agreement dated as of September 30, 1996,
between Protection One, Inc. ("POI") and Sequence Systems

4.4 Registration Rights Agreements dated as of October 4, 1996, among
POI and the stockholders of Security Holdings

5.1 Opinion of Mitchell, Silberberg & Knupp LLP

23.1 Consent of Coopers & Lybrand L.L.P.

23.2 Consent of KPMG Peat Marwick LLP

23.3 Consent of Mitchell, Silberberg & Knupp LLP (included in Exhibit 5.1)

24.1 Power of attorney (included on signature page)
</TABLE>

_______________

(1) Incorporated by reference to Exhibit 3.1 to the Annual Report on Form
10-K filed by Protection One, Inc. for the year ended September 30,
1994.

(2) Incorporated by reference to Exhibit 3.1 to the Quarterly Report on
Form 10-Q filed by Protection One, Inc. for the quarter ended March
31, 1996.

Item 17. Undertakings.

The Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "Securities
Act");

II-2
<PAGE> 22
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information
set forth in this Registration Statement; Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high and
of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;

(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;

provided, however, that paragraphs (1)(i) and (1) (ii) do not apply if
this Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") that are
incorporated by reference in this Registration Statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

(4) If the Registrant is a foreign private issuer, to file a
post-effective amendment to the Registration Statement to include any financial
statements required by Rule 3-19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided, that the Registrant includes in the prospectus, by means
of a post-effective amendment, financial statements required pursuant to this
paragraph (4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements and information required by Section
10(a)(3) of the Act or Rule 3-19 of this chapter if such financial statements
and information are contained in periodic reports filed with or furnished to
the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Form F-3.

The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.

II-3
<PAGE> 23
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Beaverton, State of Oregon, on October 8,
1996.

PROTECTION ONE, INC.

By: /s/ John W. Hesse
-------------------------------
John W. Hesse
Executive Vice President
and Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James M. Mackenzie, Jr. and John W.
Hesse, and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and re-substitution and each with power to act
alone, for the undersigned and in his name, place and stead, and in any and all
capacities, to sign and execute any and all amendments (including
post-effective amendments) to this Registration Statement on Form S-3 and to
file the same with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>

/s/ James M. Mackenzie, Jr. President, Chief Executive October 8, 1996
- -------------------------------------- Officer and Director
James M. Mackenzie, Jr.

/s/ John W. Hesse Executive Vice President, October 8, 1996
- -------------------------------------- Chief Financial Officer
John W. Hesse (principal financial officer)
and Secretary

/s/ Robert M. Chefitz Director October 8, 1996
- --------------------------------------
Robert M. Chefitz

/s/ Ben Enis Director October 8, 1996
- --------------------------------------
Ben Enis

/s/ James Q. Wilson Director October 8, 1996
- --------------------------------------
James Q. Wilson
</TABLE>

II-4

<PAGE> 1

EXHIBIT 2.1

AGREEMENT AND PLAN OF REORGANIZATION

DATED: September 30, 1996

BETWEEN: Protection One Alarm Monitoring, Inc.,
a Delaware corporation
3900 S.W. Murray Boulevard.
Beaverton, Oregon 97005 ("Monitoring")

AND: Sequence Systems, Inc.,
dba Alltec Security Systems,
an Oregon corporation
7515 N.E. Ambassador Place, Suite C
Portland, Oregon 97220 ("Sequence")

AND: Robert P. Thompson
George T. Nuttle
Donald A. Buss
7515 N.E. Ambassador Place, Suite C
Portland, Oregon 97220 ("Stockholders")

RECITALS:

A. Sequence owns and operates a business engaged in the
maintenance and monitoring of alarm systems for residential and commercial
customers (the "Business");

B. Stockholders are Sequence's sole stockholders;

C. Sequence wishes to transfer the Business and
substantially all of its assets to Monitoring solely in exchange for voting
shares of common stock of Protection One, Inc. (the "Parent"), which is the
owner of all of the issued and outstanding capital stock of Monitoring, and the
assumption by Monitoring of certain of the liabilities of Sequence in a
transaction intended to qualify as a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended, it being
contemplated by Sequence and Monitoring that Sequence shall thereafter, as an
integral part of the transaction, distribute the shares of Parent to
Stockholders in complete liquidation of Sequence. In addition, Sequence and
Stockholders are willing to enter into nonsolicitation and noncompetition
covenants set forth in this Agreement; and

D. Monitoring wishes to acquire the Business and
substantially all of the assets of Sequence on the terms and conditions set
forth herein.

NOW, THEREFORE, in consideration of the foregoing Recitals,
which are expressly incorporated herein and by this reference made a part
hereof, the parties hereto agree as follows:

1. Definitions. The following terms shall be defined as set forth
below:

1.1 Accounts Receivable. The term "Accounts Receivable"
is defined as Sequence's right, title and interest in and to that portion of
the Accounts Receivable of Sequence

Page 1 - AGREEMENT AND PLAN OF REORGANIZATION
<PAGE> 2
invoiced by Sequence prior to September 20, 1996, created in the ordinary
course of Sequence's business for the maintenance and monitoring of Sequence's
Subscribers, for services to be rendered on and after the Closing Date. A
detailed aged Accounts Receivable listing is attached hereto as SCHEDULE 1.1
and by this reference incorporated herein.

1.2 Alarm Accounts. The term "Alarm Accounts" is defined
as the installed alarm accounts set forth on SCHEDULE 1.2 attached hereto and
by this reference incorporated herein, all Equipment, all available records
(including, without limitation, service and installation records), files,
computer information, monitoring codes, upload codes, download codes, master
codes, lock-out codes, communicator identification codes, all goodwill of
Sequence related thereto and any and all Contracts and related agreements for
alarm systems and services between Sequence and the Subscribers.

1.3 Assets. The term "Assets" is defined as all Accounts
Receivable, Alarm Accounts, Equipment, Other Property and Telephone Lines.

1.4 Closing and Closing Date. The terms "Closing" and
"Closing Date" are defined as September 30, 1996, or such earlier date as the
parties may mutually agree upon in writing when the Closing of the transfer of
the Assets and the assumption of certain of the liabilities of Sequence is
consummated. The transfer and delivery to Monitoring of the Assets and
Monitoring's assumption of certain of the liabilities of Sequence shall be
effective upon receipt of the Closing Payment by Sequence.

1.5 Closing Exchange Payment. The term "Closing Exchange
Payment" is defined as an amount equal to Two Million Nine Hundred Eighty-Five
Thousand Six Hundred Sixty-Two and 74/100 Dollars ($2,985,662.74), which is
equal to ninety percent (90%) of the Exchange Price less the amount of the
Unearned Income plus the amount of Six and 30/100 Dollars ($6.30) at the
Closing and which is subject to adjustment under Section 3.

1.6 Closing Value. The term "Closing Value" is defined
as the average per share closing price of Parent's shares of common stock for
the ten (10) trading days beginning on the twelfth (12th) trading day
immediately prior to the Closing Date.

1.7 Deferred Exchange Payment. The "Deferred Exchange
Payment" is defined as an amount equal to Three Hundred Thirty-Six Thousand
Eight Hundred and 64/100 Dollars ($336,800.64), which is equal to ten percent
(10%) of the Exchange Price and which is subject to adjustment under Section 3.

1.8 Equipment. The term "Equipment" is defined as any
and all installations and equipment owned or leased by Sequence located at the
Subscribers' residences or places of business with respect to the Alarm
Accounts.

1.9 Exchange Price. The term "Exchange Price" is defined
as an amount equal to Three Million Three Hundred Twenty-Two Thousand Four
Hundred Sixty-Three and 38/100 Dollars ($3,322,463.38), which is equal to the
QRR at Closing multiplied by a factor of forty- three (43) less Unearned Income
plus the amount of Six and 30/100 Dollars ($6.30) at Closing.

1.10 Guaranty Period. The term "Guaranty Period" is
defined as the twelve (12) month period following the Closing Date to the
Second Look Date.

Page 2 - AGREEMENT AND PLAN OF REORGANIZATION
<PAGE> 3
1.11 Lost QRR. The term "Lost QRR" is defined as the QRR
(which was determined as of the Closing Date) for any Alarm Accounts which were
cancelled because a notice of cancellation, dispute or intent not to renew had
been received by Monitoring or Sequence, either orally or in writing, after the
Closing Date. Lost QRR shall not include Alarm Accounts which are cancelled
due to a Subscriber moving and within sixty (60) days of cancellation either
the Subscriber signs a new monitoring agreement at a new location or a new
subscriber signs a new monitoring agreement at the Subscriber's original
location.

1.12 New Accounts. The term "New Accounts" is defined as
installed Alarm Accounts, all equipment related thereto, all available records
(including, without limitations, service and installation records), files,
computer information, monitoring codes, upload codes, download codes, master
codes, lock-out codes, communicator identification codes, all goodwill of
Sequence related thereto and any and all Contracts and related agreements for
alarm systems and services between Sequence and the New Accounts Subscribers,
which Sequence shall assign, transfer and deliver to Monitoring after the
Closing pursuant to Section 3.2.3 of this Agreement.

1.13 Other Property. The term "Other Property" is defined
as certain central station equipment, a schedule of which is attached hereto as
SCHEDULE 1.13 and by this reference incorporated herein.

1.14 QRR. The term "QRR" is defined as the gross monthly
recurring revenue of the Alarm Accounts under valid Contracts, as such term is
defined in Section 5.12, for the leasing, monitoring and servicing of alarm
systems which are in full force and effect as of the Closing Date, do not
contain restrictions or limitations against assignment to Monitoring, have a
minimum initial contract term of one (1) year and which have receivable
balances which are current or in arrears no more than sixty (60) days from
their due dates. QRR is reduced by: (i) the total monthly charges paid to
third-party response agencies for patrol or alarm response; (ii) any costs
associated with the provision of supervised monitoring, opening and closing
reports or of inspection services or associated with cellular, derived channel
or long range radio monitoring facilities; (iii) a deduction for leased Alarm
Accounts if ownership of the alarm system passes to the Subscriber at the end
of the lease; and (iv) a deduction for any Contract that is not automatically
renewable. QRR does not include any amounts derived from or which are expected
to be derived from: (a) services to be provided under any Contract which by its
terms is terminable and has been terminated by a Subscriber as a result of the
consummation of the transaction contemplated hereby; (b) services to be
provided under any Contract as to which verbal or written notice of
cancellation, termination or non-renewal has been received prior to the
Closing; (c) time and materials charges or any other like charges for
non-recurring, non-regular services and charges relating to maintenance
services, extended warranty or fire inspection services; (d) reimbursement for
or prepayment of leased telephone line charges associated with the Alarm
Accounts; (e) reimbursement for or prepayment of any false alarm assessments;
(f) reimbursement for or prepayment of any taxes, fees, increased monitoring
charges or other charges imposed by any governmental authority with respect to
the furnishing of alarm services; and (g) charges paid to third party response
agencies on all Alarm Accounts. Quarterly, semi-annual and annual billings
shall be divided by three (3), six (6) and twelve (12), respectively, to
determine the monthly recurring revenue amount.

1.15 Second Look Date. The term "Second Look Date" is
defined as the day that is twelve (12) months after the Closing.

Page 3 - AGREEMENT AND PLAN OF REORGANIZATION
<PAGE> 4
1.16 Subscriber. The term "Subscriber" is defined as any
person, business, corporation or other entity that has an Alarm Account with
Sequence for the provision of alarm and/or monitoring services.

1.17 Telephone Lines. The term "Telephone Lines" is
defined as Sequence's interest in all of the telephone lines, voice service
lines, call back lines and numbers on which the Alarm Accounts are being
monitored or which are otherwise used or owned by Sequence in connection with
the business of service and monitoring. All of the telephone numbers for the
Telephone Lines are listed in SCHEDULE 1.17.

1.18 Unearned Income. The term "Unearned Income" is
defined as: (i) all Accounts Receivable; and (ii) payments and deposits
received by Sequence prior to the Closing for services to be rendered on or
after the Closing to the Alarm Accounts by Monitoring.

2. Terms of Exchange. In reliance upon the warranties,
representations and covenants contained in this Agreement and subject to the
terms and conditions of this Agreement and in consideration for the Exchange
Price:

2.1 Assets Assigned, Transferred and Conveyed. Sequence
assigns, transfers and conveys to Monitoring, and Monitoring accepts the
assignment, transfer and conveyance from Sequence, at the Closing, all of
Sequence's right, title and interest in and to the Assets.

2.2 Liabilities Assumed. Except as set forth in Section
7 of this Agreement, at the Closing, Monitoring accepts the assignment of and
assumes responsibility for Sequence's obligation to provide monitoring and
service under the Contracts and accepts the assignment of, assumes
responsibility for and agrees to pay in full at the Closing Sequence's
liabilities and indebtedness described in SCHEDULE 2.2 (the liabilities and
obligations described in SCHEDULE 2.2 are referred to herein as "Sequence's
Third Party Indebtedness" and the creditors thereunder are referred to herein
as "Sequence's Third Party Creditors"). Except as provided in this Section
2.2, Monitoring and Parent do not, and shall not, assume, or be deemed to
assume, under this Agreement or otherwise, any debt, liability or obligation of
Sequence or Stockholders of any nature whatsoever, whether arising by tort or
contract or otherwise, whether known or unknown, including, without limitation,
(a) liability arising out of actions or omissions of Sequence or Stockholders
prior to or after the Closing Date; (b) liability resulting from breach of
contract arising out of actions of Sequence or Stockholders or as a result of
the transfer and delivery of the Assets pursuant to this Agreement; (c)
liability in connection with contracts not assumed by Monitoring under this
Agreement or in connection with obligations under the Alarm Accounts where
performance was required prior to the Closing Date; (d) liability of Sequence
for any taxes, including sales taxes, arising prior to the date hereof or in
connection with the transfer and delivery of the Assets hereunder; (e) any
liability in connection with representations, promises or warranties made by
Sequence to Subscribers which are not described in the Contract with
Subscribers; and (f) liability in connection with any of Sequence's employees,
including salaries, benefits, commissions or any employee benefit plan of
Sequence (all of such debts, liabilities and obligations referred to herein as
the "Excluded Liabilities"). All Excluded Liabilities of Sequence that are not
assumed by Monitoring hereunder shall be paid, performed and discharged by
Sequence.

3. Exchange Price and Adjustments to Exchange Price.

3.1 Exchange Price. In exchange for the assignment,
transfer and conveyance of the Assets, for the assumption of certain of
Sequence's liabilities hereunder and for the

Page 4 - AGREEMENT AND PLAN OF REORGANIZATION
<PAGE> 5
nonsolicitation agreement set forth in Section 9, as more fully set forth on
SCHEDULE 3.1, Monitoring:

3.1.1 Closing Exchange Payment. Shall (i) accept
the assignment of, assume responsibility for and pay at the Closing or as soon
as reasonably possible thereafter Sequence's Third Party Indebtedness (which
equals the amount of Seven Hundred Five Thousand Six Hundred Sixty-Three and
52/100 Dollars ($705,663.52)) and (ii) deliver to Sequence stock certificate(s)
for one hundred sixty-seven thousand six hundred forty-seven (167,647) shares
of the common stock of Parent (the "Pro One Stock") (such number of shares
being equal to Two Million Two Hundred Seventy-Nine Thousand Nine Hundred
Ninety-Nine and 22/100 Dollars ($2,279,999.22) divided by the Closing Value) on
the Closing Date or as soon as reasonably possible thereafter, which amount in
the aggregate equals the Closing Exchange Payment.

3.1.2 Registration of Pro One Stock. As soon as
reasonably practicable after the Closing Date, and in no event later than ten
(10) days after the Closing Date, shall cause Parent to file a Registration
Statement on Form S-3 registering the offer and sale by Sequence from time to
time of the Pro One Stock delivered to Sequence under this Agreement. To
evidence the obligation of Parent to register the Pro One Stock, Parent and
Sequence shall enter into a Registration Rights Agreement defining their
respective rights and responsibilities with respect to the Pro One Stock and
each of the Stockholders shall execute and deliver to Monitoring an Affidavit
and Agreement verifying the status of Sequence as an "accredited investor"
within the meaning of Rule 501(a)(1) of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, a copy of the forms of which are attached hereto as SCHEDULE 3.1.2 and
by this reference incorporated herein.

3.1.3 Deferred Exchange Price. Shall deliver to
Sequence within thirty (30) days after the Second Look Date twenty-four
thousand seven hundred sixty-four and 75/100 (24,764.75) shares of Pro One
Stock (such number of shares being equal to the amount of Three Hundred
Thirty-Six Thousand Eight Hundred and 64/100 Dollars ($336,800.64) (the
"Deferred Exchange Payment") divided by the Closing Value). The Deferred
Exchange Payment shall be subject to adjustment under Section 3.2.

3.2 Exchange Price Adjustments. The Exchange Price,
including the Closing Exchange Payment and the Deferred Exchange Payment, shall
be subject to adjustment as follows:

3.2.1 Exchange Price Verification. Within one
hundred twenty (120) days after the Closing, Monitoring shall deliver to
Sequence a schedule setting forth its calculation of the QRR in effect as of
the Closing Date (the "Closing QRR"), Sequence's Third Party Indebtedness and
the Unearned Income together with a certificate signed by an officer of
Monitoring setting forth that the schedule has been prepared in accordance with
the terms and provisions of this Agreement. In the event the Closing QRR,
Sequence's Third Party Indebtedness and the Unearned Income set forth on the
schedule is more or less than the QRR, Sequence's Third Party Indebtedness and
the Unearned Income used to calculate the Exchange Price at Closing, and in
such event, the Exchange Price, the Closing Exchange Payment and the Deferred
Exchange Payment shall be adjusted upward or downward accordingly. If the
Exchange Price is adjusted upward as a result of the change in the QRR,
Monitoring shall, concurrently with the delivery of the schedule, deliver to
Sequence stock certificate(s) for such number of shares of Pro One Stock equal
to the Closing QRR, less the QRR, multiplied by forty-three (43), then
multiplied by ninety percent (90%) and then divided by the Closing Value, and
an amount equal to the Closing QRR, less the QRR, multiplied by forty-three
(43) and then multiplied by ten

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<PAGE> 6
percent (10%), shall be added to the Deferred Exchange Payment. If the
Exchange Price is adjusted downward as a result of a change in the QRR,
Sequence shall, within ten (10) days of the receipt of the schedule, deliver to
Monitoring stock certificate(s) for such number of shares of Pro One Stock
equal to the QRR, less the Closing QRR, multiplied by forty-three (43), then
multiplied by ninety percent (90%) and then divided by the Closing Value, and
the Deferred Exchange Payment shall be decreased by an amount equal to the QRR,
less the Closing QRR, multiplied by forty-three (43) and then multiplied by ten
percent (10%). If the Exchange Price is adjusted upward as a result of a
change in Sequence's Third Party Indebtedness or the Unearned Income,
Monitoring shall, concurrently with the delivery of this schedule, deliver to
Sequence stock certificate(s) for such number of shares equal to the amount of
the increase divided by the Closing Value. If the Exchange Price is adjusted
downward as a result of a change in Sequence's Third Party Indebtedness or the
Unearned Income, Sequence shall, within ten (10) days of the receipt of the
schedule, deliver to Monitoring stock certificate(s) for such number of shares
equal to the amount of the decrease divided by the Closing Value. If there are
increases and decreases in the Exchange Price, they shall be offset against
each other in determining the number of shares of Pro One Stock to be delivered
by a party hereto.

3.2.2 Exchange Price Adjustment. After the Second
Look Date and on or before thirty (30) days after the Second Look Date,
Monitoring shall compute the Lost QRR for the Alarm Accounts as of the Second
Look Date and prepare and deliver to Sequence a schedule setting forth the
amount of the Lost QRR, the amount of any adjustment to the Deferred Exchange
Payment, and the amount of the Deferred Exchange Payment. For purposes of
Monitoring's calculation of the Lost QRR, of any adjustment to the Exchange
Price and the Deferred Exchange Payment, and of the amount of the Deferred
Exchange Payment to be paid to Sequence, Monitoring shall deduct from the Lost
QRR an amount equal to four percent (4%) of the Closing QRR for all Alarm
Accounts which Sequence does not continue to service on an ongoing basis after
the Closing Date (e.g., the Alarm Accounts not set forth on SCHEDULE 7.3) (the
"Lost QRR Allowance"). The Exchange Price and the Deferred Exchange Payment
shall be reduced by the amount of the Lost QRR, less the Lost QRR Allowance,
multiplied by forty-three (43). Sequence shall, in all events, be entitled to
not less than forty percent (40%) of the Deferred Payment before any adjustment
pursuant to this Section 3.2.2 (subject to the right of Monitoring hereunder to
offset against such amount or any other amounts which Sequence may owe to
Monitoring hereunder as of the Second Look Date). Any adjustment of the
Exchange Price pursuant to this Section 3.2.2 shall be subtracted from the
Deferred Exchange Payment. In the event the downward adjustment of the
Exchange Price exceeds the Deferred Exchange Payment, Monitoring should not be
required to deliver to Sequence any certificate(s) for any shares of Pro One
Stock for the Deferred Exchange Payment and Sequence shall not be liable for
any shortfall.

3.2.3 New Accounts. During the first one hundred
twenty (120) days of the Guaranty Period, Sequence may assign, transfer and
deliver to Monitoring New Accounts. Monitoring shall deliver to Sequence stock
certificate(s) for such number of shares of Pro One Stock equal to the QRR of
such New Accounts, divided by the Closing Value, multiplied by forty-three (43)
and then multiplied by ninety percent (90%), less Unearned Income attributable
to such New Accounts within ten (10) days after the expiration of such one
hundred twenty (120) day period. An amount equal to the QRR of such New
Accounts, multiplied by forty-three (43) and then multiplied by ten percent
(10%), shall be added to the Deferred Exchange Payment. Monitoring, at the
time of the delivery of the stock certificate(s) for the shares of Pro One
Stock in exchange for the New Accounts, may subtract from the number of shares
of Pro One Stock Sequence is required to deliver to Monitoring under Section
3.2.2, if Sequence has not yet delivered to Monitoring stock certificate(s) for
such shares. A schedule of Sequence's sales leads, referrals and orders for
alarm systems received by Sequence as of the Closing Date and all other

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work in progress and installations of alarm system equipment which Sequence has
not completed as of the Closing Date (collectively, the "Work in Progress") is
attached hereto as SCHEDULE 3.2.3(A) and by this reference incorporated herein
and a schedule of all pending new subscribers (the "Pending New Subscribers")
is attached hereto as SCHEDULE 3.2.3(B) and by this reference incorporated
herein. Monitoring agrees that Sequence may assign, transfer and deliver to
Monitoring during such one hundred twenty (120) day period as New Accounts when
the prospective subscribers listed in SCHEDULE 3.2.3(A) and (B) execute and
deliver to Monitoring a Contract and otherwise satisfy all of Monitoring's
requirements hereunder for New Accounts. Each New Account must be located in
Monitoring's existing market areas and must meet all of Monitoring's standard
credit requirements, the criteria agreed to herein fro the Alarm Accounts, all
representations and warranties set forth in this Agreement and the requirements
set forth in the definition of QRR. On the date each New Account is
transferred to Monitoring, there shall be no more than two (2) months of either
free monitoring service or prepaid monitoring service. Upon transfer to
Monitoring of the New Account, the New Account shall be deemed to be an Alarm
Account and subject to all the terms, conditions, representations and
warranties set forth in this Agreement as it relates to Alarm Accounts.
Sequence shall also deliver to Monitoring the Contracts, records, information
and documents which Sequence may require in order to take possession and
control of the New Account and provide monitoring service.

3.2.4 Resolution of Exchange Price Dispute. Any
disputes with respect to the adjustment of the Exchange Price and the Deferred
Exchange Payment shall be resolved in accordance with Section 17.10. Sequence
shall notify Monitoring of any dispute with respect to the adjustment of the
Exchange Price and the Deferred Exchange Payment within fifteen (15) days after
delivery of the schedule. If Sequence notifies Monitoring of such a dispute,
Monitoring shall not pay to Sequence the Deferred Exchange Payment, except for
any amounts mutually agreed to be Sequence and Monitoring, until the parties
have resolved the dispute by arbitration and all time periods for appealing any
arbitrator's award have expired.

3.3 Rights to Terminated or Cancelled Accounts. Within
thirty (30) days after the end of each month during the Guaranty Period,
Monitoring will transfer to Sequence, without recourse or warranty of any kind,
the subscriber files for those Subscribers whose Alarm Accounts have been
cancelled or terminated during the Guaranty Period and for which an adjustment
to the Exchange Price and the Deferred Exchange Payment was made. Monitoring
reserves the right to collect past due charges, Monitoring's customary
cancellation fee and any other amounts due under the Contracts with the
Subscribers, on any terms or conditions deemed acceptable by Monitoring, in its
sole discretion. Monitoring makes no representations with respect to the
cancelled or terminated Alarm Accounts transferred to Sequence hereunder, and
Sequence acknowledges and agrees that Monitoring shall have no liability to
Sequence if the Subscribers of these cancelled or terminated Alarm Accounts
fail to renew, reinstate or reaffirm their Contracts with Sequence.

3.4 Instruments of Conveyance and Transfer. Sequence
shall deliver to Monitoring at the Closing such instruments of transfer,
including bills of sale and assignments in form and substance reasonably
satisfactory to Monitoring as shall be effective to vest in Monitoring all of
the right, title and interest of Sequence in and to the Assets and letters of
agency and supersedure forms for transfer to Monitoring of the Telephone Lines.
Simultaneously with or immediately after such delivery, Sequence will execute
such other documents reasonably requested by Monitoring and do any further acts
or things reasonably necessary to cause all of the Alarm Accounts to be
connected to Monitoring's central monitoring station and to put Monitoring in
possession and control of the Assets, including without limitation, providing
to Monitoring all central station receiver programming and equipment
information in a form

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<PAGE> 8
acceptable to Monitoring to permit Monitoring to monitor the Alarm Accounts
without interruption and delivering to Monitoring a current central station
printout at Sequence's expense as soon as reasonably possible after
Monitoring's request therefor.

3.5 Invoicing, Servicing and Collection by Monitoring.
After the Closing Date, Monitoring is authorized to notify the Alarm Accounts
to make all further payments under the Contracts and the Accounts Receivable
for services to be rendered on or after the Closing Date directly to Monitoring
and payable to the order of Monitoring. If payments are made payable to the
order of Sequence for services to be rendered on or after the Closing Date,
Monitoring is hereby irrevocably appointed as Sequence's attorney-in-fact to
endorse any checks, orders or other payment instruments in connection with each
Alarm Account. Sequence shall remit to Monitoring any payments for services to
be rendered on or after the Closing Date made to Sequence after the Closing
Date within seven (7) days of their receipt. Monitoring is also authorized to
bill or invoice the Subscribers for all amounts due and to become due under the
Alarm Accounts after the Closing Date, to compromise, adjust and grant
extensions of time for payment on the Alarm Accounts and to take any collection
action deemed necessary or advisable by Monitoring, in its sole discretion,
without notice to Sequence and without affecting Sequence's obligations
hereunder. From and after the Closing Date, Sequence shall have no authority
to, and will not, without Monitoring's prior written consent, accept, negotiate
or deposit payments or other amounts due in connection with the Alarm Accounts.

4. Bulk Sales. Monitoring hereby waives compliance by Sequence
with respect to any applicable bulk sales or similar laws of any jurisdiction
in connection with the transfer and delivery of the Assets to Monitoring, and
Sequence agrees to indemnify Monitoring and to save and hold Monitoring
harmless from, for and against any liability, damage, loss or deficiency
(including reasonable attorney's fees) which Monitoring may suffer or sustain
as a result of any claims made by creditors of Sequence against Monitoring
("Creditor's Claim"). In the event of a Creditor's Claim, Monitoring shall so
notify Sequence in writing and Sequence shall have thirty (30) days in which to
satisfy or discharge the Creditor's Claim.

5. Representations, Warranties and Agreements of Sequence.
Except as otherwise set forth or described on SCHEDULE 5 ("Sequence's and
Stockholders' Disclosure Schedule") or any other Schedule or Exhibit attached
hereto, Sequence and Stockholders agree, represent and warrant as follows:

5.1 Corporate Status of Sequence. Sequence is a
corporation duly organized and validly existing under the laws of the State of
Oregon, does not have any subsidiaries and does not own any securities of, or
have any proprietary interest in, any other entity. Sequence, as a result of
the character and location of the Assets and the nature of the business
conducted by it, is qualified to conduct business in Washington as a foreign
corporation. Sequence has full corporate power and corporate authority to own,
or hold under lease, the Assets and is qualified to conduct business in all
jurisdictions except where the failure to qualify would not materially
adversely affect the business of Sequence.

5.2 Capitalization. The authorized capital stock of
Sequence consists of one hundred thousand (100,000) shares of Class A common
stock, no par value per share and one hundred thousand (100,000) shares of
Class B common stock, of which sixty-six thousand six hundred sixty-seven
(66,667) shares of Class B common stock are issued and outstanding. All of
Sequence's issued and outstanding shares of stock have been validly issued to
Stockholders and are fully paid and non-assessable and are not subject to any
preemptive or other similar rights. Stockholders are the owners, beneficially
and of record, of all of the issued and outstanding

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<PAGE> 9
shares of Sequence free and clear of all restrictions of any kind, nature or
description. Sequence has not authorized or issued any securities other than
to Stockholders, and no person, corporation, or entity holds any option,
warrant or right to purchase or otherwise acquire any shares of capital stock
of Sequence. Stockholders have not entered into any agreement with any former
stockholder of Sequence with respect to the sale, transfer or disposition of
the capital stock or Assets of Sequence or in any manner affecting the capital
stock or Assets of Sequence.

5.3 Corporate Documentation. Stockholders have furnished
Monitoring with a true and complete copy of Sequence's Articles of
Incorporation, certified by the Secretary of State of the State of Oregon, a
true and complete copy of Sequence's Bylaws, certified by the Secretary of
Sequence, a certificate of the Secretary of State of the State of Oregon
evidencing the due organization and valid existence of Sequence under the laws
of the State of Oregon and a certificate of the Secretary of State of each
jurisdiction in which Sequence is qualified as a foreign corporation stating
that Sequence is authorized to transact business in such state and is a foreign
corporation in good standing. In addition, Sequence's stock transfer records
and corporate records of the meetings of the directors and stockholders of
Sequence which have been delivered to Monitoring are true, accurate and
complete and reflect all issues and transfers of stock to date and all actions
and proceedings of such bodies to date.

5.4 Authorization of Sequence and Stockholders; No
Adverse Consequences. This Agreement has been duly executed and delivered by
Sequence and Stockholders and constitutes a valid obligation legally binding on
Sequence and Stockholders and is enforceable against Sequence and Stockholders
in accordance with its terms, except as enforceability may be limited or
affected by applicable bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting the rights of creditors and except
as enforceability may be limited by rules of law governing specific
performance, injunctive relief or other equitable remedies. The execution,
delivery and performance of this Agreement by Sequence and Stockholders and the
consummation of the transactions contemplated hereby by Sequence and
Stockholders do not and will not conflict with, or result in a breach, default,
violation or loss of a material benefit under any agreement, mortgage, lease,
license or other instrument or obligation of Sequence and Stockholders in
connection with the operation of the Business or any of the Assets (including,
without limitation, Monitoring's payment of Sequence's Third Party Indebtedness
on the Closing Date in the amounts set forth on SCHEDULE 2.2); do not and will
not require the consent or permission of any person or governmental agency; and
do not and will not violate any law, rule or regulation of any agency or
governmental body to which Sequence is, or Stockholders are, subject and that
is individually or in the aggregate material to the transactions contemplated
hereby. No registration, declaration or filing with any governmental or
administrative authority is required on the part of Sequence and Stockholders
in connection with the execution, delivery and performance of this Agreement.

5.5 Title to Assets. Sequence has good and valid title
to the Assets, free and clear of all liens, claims, charges or other
encumbrances, with full lawful right, power, capacity and authority to assign,
transfer and deliver the Assets to Monitoring pursuant to this Agreement and to
consummate the transactions contemplated hereby, and there are no agreements,
arrangements or understandings restricting or otherwise relating to the
transfer of the Assets. At the Closing, Monitoring will receive good and valid
title to the Assets, free and clear of all liens, claims, charges or other
encumbrances of any nature whatsoever.

5.6 Financial Statements. Sequence has heretofore
delivered to Monitoring a copy of Sequence's balance sheet dated as of
September 20, 1996 ("Financial Statements"), a copy of which is included in
SCHEDULE 5. The Financial Statements accurately present the financial

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<PAGE> 10
position, results of the operations and the changes in financial position of
Sequence for the periods indicated; were accurately prepared from the books and
records of Sequence in accordance with the accounting policies then in effect;
and have been prepared on a consistent basis with past periods, all subject to
year-end adjustment, which adjustment in the aggregate shall not materially
affect the results contained therein.

5.7 Changes in Business. Except as expressly allowed or
contemplated by this Agreement, since the date of the Financial Statements,
Sequence has conducted its business in the ordinary course and there has not
occurred:

(i) Any change, effect or occurrence that has, or
is reasonably likely to have, individually or in the aggregate, a material
adverse impact on (i) the condition (financial or otherwise) or prospects of
Sequence, its business or the Assets, or (ii) the operation of the business
before or after the Closing Date or the ownership or other use of the Assets by
Monitoring and Sequence thereafter.

(ii) Any acquisition, sale or disposition of
property or assets by or of Sequence, except in the ordinary course of
business;

(iii) Any entry into, amendment of, relinquishment,
termination or non-renewal by Sequence of any Contracts, lease transaction,
commitment or other right or obligation other than in the ordinary course of
business; or

(iv) Any agreement or arrangement made by Sequence
to take any action after the date hereof which, if taken prior to the date
hereof, would have made any representation or warranty set forth in this
Section 5.7 untrue or incorrect as of the date hereof.

5.8 Undisclosed Liabilities. To the best knowledge of
Stockholders, there are no liabilities or obligations of any nature of
Sequence, due or to become due, determined or determinable, absolute, accrued,
contingent or otherwise, and there are no conditions, situations or
circumstances that have existed, are existing or that could reasonably be
expected to result in any such liabilities or obligations, except, in any such
event, (i) as, and to the extent, set forth or specifically reserved against on
the Financial Statements, (ii) liabilities incurred since the date of the
Financial Statements in the ordinary and usual course of business consistent
with past practice (none of which is a material uninsured liability for breach
of contract, breach of warranty, tort or infringement claim, violation of law
or lawsuit), and (iii) liabilities incurred in connection with or contemplated
by this Agreement or listed in the schedules attached hereto (including without
limitation SCHEDULE 2.2).

5.9 Taxes. Sequence has duly and timely filed all tax
reports and returns required to have been filed on or before the Closing Date,
and such returns as filed are true and correct in all material respects. All
federal, state, local and foreign income, receipts, profits, franchise, sales,
use, occupation, real and personal property, excise, employment or other taxes
(including interest and penalties of Sequence) required to have been paid on or
before the Closing Date, whether or not assessed, have been or shall be fully
paid on or prior to the due date thereof. Sequence has never filed a
consolidated, combined or unitary tax return with any other person or entity.
There is no unpaid interest, penalty or addition to tax due or claimed to be
due from, or any unpaid tax deficiency, determination or assessment outstanding
against Sequence or any basis therefor known to Sequence. There are no tax
liens on, pending against or, to the best knowledge of Stockholders, threatened
against Sequence or its Assets. Sequence has not filed a consent under Section
341(f)(1) of the Internal Revenue Code of 1986, as amended.

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<PAGE> 11
5.10 No UL Deficiencies. Sequence's central station
located in Longview, Washington has been approved and listed by Underwriters'
Laboratory ("UL") and is not subject to any deficiencies with respect thereto,
including but not limited to any deficiencies in any verbal or written report
received by Sequence in connection with an inspection of such central station
facility and UL certificated systems, if any, on or about July 15, 1996. All
required fire inspections with respect to each fire alarm system installed at
the premises of Sequence's Subscribers have been performed as required in
accordance with the obligations and commitments of Sequence to UL and/or to any
applicable insurance rating organization. All UL certificates issued by
Sequence for alarm systems installed at the premises of Sequence's Subscribers
have been properly issued and the systems for which such certificates have been
issued comply in all material respects with all of the UL specifications and
standards for such systems and Stockholders are not aware of any outstanding
deficiencies.

5.11 Employees. Sequence is not bound by or subject to
(and none of the Assets are bound by or subject to) any written or oral,
express or implied, employment contracts, commitment or arrangement with any
employee. Sequence does not have any collective bargaining agreement with any
labor union, and no labor union has requested or, to the knowledge of
Stockholders, has sought to represent any of the employees, representatives or
agents of Sequence. Included in SCHEDULE 5 are the Employee Benefit Plans (as
such term is defined in the Employee Retirement Income Security Act of 1974, as
amended) Sequence maintains for its employees.

5.12 Form Contracts. Included in SCHEDULE 5 is a true and
correct copy of each type of form contract Sequence has in effect with each of
its Subscribers for alarm leases, alarm monitoring, and other alarm services
(the "Contract" or "Contracts"). Sequence has not modified, except in a
writing disclosed to Monitoring, any of the Contracts and has not undertaken
any obligations or made any warranties, agreements or guarantees to any
Subscribers other than those set forth in the Contracts. Sequence has not
entered into any other type of service or lease contract with its Subscribers
nor is Sequence rendering services to any of its Subscribers other than
pursuant to a Contract. Each Contract which Sequence has with its current
Subscribers is fully executed, valid, in full force and effect and enforceable
in accordance with its terms and meet all of the requirements set forth in the
definition of QRR set forth in Section 1.14 (less any applicable deductions
required thereunder). Sequence is not in default or material violation of any
Contracts with its Subscribers. Sequence does not have any warranty
obligations which exceed in time or scope a one (1) year parts and labor
warranty which commence from the date of installation of each alarm system. On
the Closing Date, Sequence possess all original monitoring and lease contracts
with Subscribers and such other documents and information which Monitoring will
need and may reasonably require to perform monitoring, repair, servicing and
other alarm services requested by Subscribers or required to be provided
pursuant to the Contracts.

5.13 Increase in Fees. Since August 1, 1996, Sequence has
not increased recurring monitoring charges or service charges payable by
Sequence's retail Subscribers, other than for additions or changes in services
or protection.

5.14 No Defaults. Sequence is not in default, or alleged
to be in default under any material agreement, license or obligation relating
to the Assets and/or Assumed Liabilities. Except for delinquent payments by
some of the Subscribers, no other party to any such agreement, license or
obligation is in default thereunder and there exists no condition or event
which, after notice or lapse of time or both, would constitute a default by any
party to any such agreement, license or obligation.

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<PAGE> 12
5.15 License and Permits. Sequence and its employees have
all material governmental licenses and permits (federal, state and local)
necessary for the conduct of the business as now carried on by the Sequence,
and such licenses are in full force and effect. Copies of all of Sequence's
licenses are included in SCHEDULE 5. No violations are or have been recorded
and Sequence and Stockholders are not aware of any unrecorded violations in
respect of any such licenses or permits of Sequence and no proceedings are
pending or to Stockholders' knowledge threatened concerning the revocation or
limitation of any such license or permit of Sequence.

5.16 Compliance With Laws. Sequence has complied with all
material laws, rules, regulations and orders applicable to the operation of the
business conducted by the Sequence. Sequence has not received notice nor taken
any action or failed to take any action which action or failure will or would,
in any way, preclude or prevent Monitoring from using the Assets after the
Closing in the same manner as theretofore used by the Sequence.

5.17 Litigation. There are no claims, litigation,
proceedings or investigations pending or threatened against Sequence, including
any incidents in the past two (2) years where a Subscriber or third party
alleged damages in excess of One Thousand Dollars ($1,000), which were alleged
to result from a failure of an alarm system or Sequence's service.

5.18 Brokers. Sequence and Stockholders have not employed
any broker, finder or agent or dealt with anyone purporting to act in such
capacity or agreed to pay any brokerage fee, finder's fee or commission in
connection with the transactions contemplated by this Agreement.

5.19 Insurance. Sequence has in full force and effect the
policies of automobile liability insurance and commercial general liability
insurance ("Liability Insurance"), a copy of which Liability Insurance policy
in included in SCHEDULE 5. All of the Contracts are covered by Sequence's
Liability Insurance coverage for negligence claims. Sequence is not in default
and no event has occurred (or failed to occur) that, with the passing of time
or the giving of notice or both would constitute a default by Sequence under
any such policy of insurance, or would entitle the insurer under such insurance
to deny coverage of any claim against Sequence.

5.20 Monitoring. All of the Alarm Accounts are on the
Telephone Lines which are owned and controlled by Sequence and no other alarm
accounts owned by any third parties are monitored on the Telephone Lines.
Sequence should not incur any third party monitoring costs related to the Alarm
Accounts. None of the Alarm Accounts need to be reprogrammed in order for
Sequence to transfer the monitoring to Monitoring's monitoring facility.

5.21 Equipment and Other Property. All of the Equipment
is in good working order and condition, ordinary wear and tear, routine service
needs and subscriber misuse or non-use excepted, and such Equipment has been
installed in accordance with good workmanlike practices prevailing in the
industry at the time of installation. All Equipment conforms in all material
respects to the Contract pursuant to which it was installed and comply with all
material applicable laws, rules, regulations and codes at the time of its
installation. All of the Other Property included among the Assets is in good
operating condition and repair, normal wear and tear excepted.

5.22 Work in Progress and Pending New Subscribers. To the
best of Sequence's knowledge, as of the Closing Date, (i) all contracts or
agreements relating to any Work in Progress and Pending New Subscribers have
been disclosed to Monitoring in due diligence, are valid and in full force and
effect, enforceable in accordance with their respective terms by

Page 12 - AGREEMENT AND PLAN OF REORGANIZATION
<PAGE> 13
Sequence, and may be assigned to Monitoring without the consent of any third
party, (ii) Sequence is not in default or material violation of any contracts
or agreements relating to any Work in Progress and Pending New Subscribers, and
(iii) Sequence has not undertaken any obligations or made any warranties,
agreements or guarantees in relation to any Work in Progress and Pending New
Subscribers, except those set forth in the written contracts and agreements
disclosed to Monitoring in due diligence.

5.23 Location of Alarm Account Subscribers. All
Subscribers are located in Arizona, California, Idaho, Nevada, New Mexico,
Oregon and Washington.

5.24 Accredited Investor Status. Sequence is an
"accredited investor" within the meaning of Rule 501(d)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended.

5.25 Schedules Delivered at Execution. All of the
schedules described in this Agreement and prepared by Sequence which are being
delivered to Monitoring upon execution hereof (i) are true, accurate and
complete as of the Closing Date; and (ii) have been prepared in conformity with
the provisions of this Agreement.

5.26 No Material Misstatements. No representation or
warranty by Sequence or Stockholders contained in this Agreement, or in any
exhibit or schedule attached hereto, contains, or will contain, any untrue
statement of a material fact or omits, or will omit, to state a material fact
necessary to make the statements contained herein or therein not misleading.

6. Representations, Warranties and Agreements of Monitoring.
Except as set forth on SCHEDULE 6 ("Monitoring's Disclosure Schedule"),
Monitoring agrees, represents and warrants as follows:

6.1 Corporate Status of Monitoring. Monitoring is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Monitoring is qualified to conduct business in
the States of Oregon and Washington as a foreign corporation. Monitoring has
full corporate power and corporate authority to consummate the transactions
contemplated hereunder.

6.2 Authorization of Monitoring. This Agreement has been
duly executed and delivered by Monitoring and constitutes a valid obligation
legally binding on Monitoring and is enforceable against Monitoring in
accordance with its terms; except as enforceability may be limited or affected
by applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the rights of creditors and except as
enforceability may be limited by rules of law governing specific performance,
injunctive relief or other equitable remedies.

6.3 Litigation. There are no claims, litigation,
proceedings or investigations pending or, to the best knowledge of Monitoring,
threatened against Monitoring which would have a material adverse impact on
Monitoring's ability to perform all of its duties and obligations under this
Agreement.

6.4 Brokers. Monitoring has not employed any broker,
finder or agent or dealt with anyone purporting to act in such capacity or
agreed to pay any brokerage fee, finder's fee or commission in connection with
the transactions contemplated by this Agreement.

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<PAGE> 14
7. Covenants of Sequence.

7.1 Announcement Letter. Sequence and Monitoring have
prepared an announcement letter, the form of which is attached hereto as
SCHEDULE 7.1 and by this reference incorporated herein, with respect to the
transfer and delivery of the Alarm Accounts pursuant to this Agreement.
Sequence has delivered to Monitoring at the Closing address labels for all of
the Subscribers and a sufficient amount of Sequence's envelopes and sheets of
letterhead to enable Monitoring to mail the announcement letter to all of the
Subscribers.

7.2 Post-Closing Monitoring. Sequence shall provide
monitoring service for the Alarm Accounts for a period of up to one hundred
twenty (120) days after the Closing Date at no charge to Monitoring. In
connection therewith, Sequence shall pay all Telephone Line charges with
respect to the monitoring of the Alarm Accounts so long as Sequence monitors
the Alarm Accounts.

7.3 Post-Closing Service and Repair. Sequence shall
provide warranty and repair services for the Alarm Accounts for a period of up
to fifteen (15) days after the Closing Date at no charge to Monitoring.
Sequence shall also provide warranty repair services for certain Alarm Accounts
on an ongoing basis after the Closing Date, a schedule of which Alarm Accounts
is attached hereto as SCHEDULE 7.3 and by this reference incorporated herein,
at no charge to Monitoring. Sequence may bill or invoice for any warranty and
repair services Sequence provides to the Alarm Accounts after the Closing Date
for which the Subscriber is obligated to pay under the Contract or for any
addition alarm equipment Sequence may sell to the Subscriber.

7.4 Insurance. Sequence shall procure and maintain in
full force through the Guaranty Period, at its expense, comprehensive general
liability insurance policies with financial sound and responsible insurers to
protect against and from loss by reason of injury to persons or damage to
property, including all third persons and property of third persons, based upon
or arising out of Sequence's business activities, with coverages and provisions
specified in Sequence's Insurance Certificate which is attached hereto as
SCHEDULE 7.4 and by this reference incorporated herein. Sequence has provided
at the Closing to Monitoring and agrees to provide at any other time with
documents reasonably requested by Monitoring evidencing the insurance coverage
required by this Section 7.4, including without limitations, certificates of
insurance.

7.5 Assignment of Nonsolicitation Agreements. Sequence
hereby assigns to Monitoring all of Sequence's right, title and interest in and
to any nonsolicitation and noncompetition covenants and agreements, if any,
with respect to the Alarm Accounts under which Sequence's employees or other
third parties have agreed not to solicit the Subscribers or compete with
Sequence. Monitoring does not assume any of Sequence's duties or obligations
under any of the nonsolicitation and noncompetition covenants and agreements
with respect to the Alarm Accounts. Sequence has provided to Monitoring true
copies of all agreements with respect to Sequence's acquisition of any of the
Alarm Accounts from any third party, including without limitation any
acquisition by way of asset purchase, stock purchase or merger.

7.6 Dissolution. From and after the Closing Date,
Sequence shall not engage in any business, shall promptly liquidate and
dissolve as a corporation and shall distribute the Pro One Stock received
pursuant to Section 3 hereof to Stockholders in complete cancellation and
redemption of the shares of Sequence's capital stock.

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<PAGE> 15
8. Covenants of the Monitoring.

8.1 Access to Books and Records. For a period of five
(5) years after the Closing Date, Monitoring agrees that Sequence and
Stockholders and their representatives shall have reasonable access to all
books and records of Sequence to the extent that such access is lawful and may
reasonably be required by Sequence and Stockholders in connection with matters
relating to or affected by the operations of Sequence prior to the Closing
Date, including without limitation tax matters and pending litigation. Such
access shall be afforded by Monitoring during normal business hours.

8.2 Sequence's Third Party Indebtedness. Monitoring
agrees to assume, discharge and hold Sequence and Stockholders harmless from
any liability for Sequence's Third Party Indebtedness (unless such liability
results from a breach of representation or warranty by Sequence or Stockholders
hereunder).

9. Nonsolicitation, Noncompetition and Nondisclosure of
Confidential Information

9.1 Nonsolicitation. For twenty (20) years following the
date of this Agreement, neither Sequence nor Stockholders will, directly or
indirectly, as a partner, limited partner, agent, representative, stockholder,
creditor or consultant or in any other capacity with any business, in any
manner, in or with respect to any Alarm Accounts in the States of Oregon and
Washington, solicit, divert or accept orders for the sale or leasing,
installation, maintenance or monitoring of alarm systems or for providing armed
response services from any Subscribers whose Alarm Accounts Sequence assigned,
transferred and conveyed to Monitoring under this Agreement or who within one
(1) year prior to such solicitation, diversion or acceptance of orders, were or
are subscribers of Monitoring, including Monitoring's subsidiaries or
affiliated corporations. For five (5) years following the date of this
Agreement, neither Sequence nor Stockholders will directly or indirectly or as
a partner, limited partner, agent, representative, stockholder, creditor or
consultant or in any other capacity with any business, recruit, offer to employ
or otherwise solicit the employment of any person who was at any time within
three (3) months prior to such action an employee of Monitoring; provided,
however, that a general classified advertisement which Sequence or Stockholders
do not direct to Monitoring's employees shall not violate the restrictions set
forth herein so long as Sequence or Stockholders do not offer employment to any
employee of Monitoring or to a person who was an employee of Monitoring within
the previous three (3) months.

9.2 Nondisclosure of Confidential Information. Sequence
and Stockholders agree to maintain as secret and confidential all "Confidential
Information," as defined herein, and agree not to use, disclose, transfer, sell
or make such information available to any successors or third parties, except
as authorized in advance and in writing by Monitoring or in the following
circumstances (a) as required in order to comply with any subpoena, court
order or applicable law, provided that the disclosing party shall use its best
efforts to give Monitoring prior written notice of such disclosure; (b) if such
information becomes publicly available not due to the fault of Sequence or
Stockholders; and (c) as such use of Confidential Information is reasonably
required for any reason set forth in Section 8.1 hereof. From and after the
Closing Date, Sequence and Stockholders shall also use their best efforts to
restrict their agents and employees from having access to or using any
Confidential Information. The term "Confidential Information" means any trade
secrets, proprietary or other information reasonably known by Sequence or
Stockholders to be confidential or reasonably designated in writing to Sequence
and Stockholders as confidential by Monitoring with respect to the Alarm
Accounts or the Assets, including, without limitation, any of the following
information: any customer or Subscriber lists;

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<PAGE> 16
any lists, notes or compilations which contain the names, addresses, telephone
numbers or any contract information for or with respect to the Subscribers; and
copies of contracts, agreements and related documents between Sequence and the
Subscribers under the Alarm Accounts.

9.3 Enforcement. Sequence and Stockholder acknowledge
and agree that the time, scope and other provisions of Sections 9.1 and 9.2
have been specifically negotiated by sophisticated parties and specifically
hereby agree that such time, scope and other provisions are reasonable under
the circumstances. Sequence and Stockholder further agree that if, at any
time, despite the express agreement of the parties hereto, a court of competent
jurisdiction holds that any portion of Sections 9.1 and 9.2 is unenforceable
for any reason, the maximum restrictions of time, scope or other provisions
reasonable under the circumstances, as determined by such court, will be
substituted for any such restrictions held unenforceable. Sequence and
Stockholders agree that Monitoring will suffer irreparable harm if Sequence or
Stockholders fail to comply with the provisions of this Section 9 and that
Monitoring will be entitled to injunctive relief to enforce the terms of this
Section 9 in addition to any other remedies available to Monitoring.

10. Conditions Precedent to Obligations of Monitoring. All
obligations of Monitoring at the Closing are subject, at Monitoring's option,
to the fulfillment prior to or at the Closing by Sequence and Stockholders of
each of the following:

10.1 Agreement and Schedules. Sequence and Stockholders
shall have delivered all schedules and exhibits required by this Agreement to
be delivered on the Closing Date.

10.2 Authorizations of Board of Directors and
Stockholders. The Board of Directors and the stockholders of Sequence shall
have approved, in accordance with Sequence's Articles of Incorporation and
Bylaws, (i) this Agreement and the execution and delivery hereof by Sequence
and Stockholders; and (ii) the performance by Sequence and Stockholders of all
of their obligations pursuant to this Agreement. Certified copies of the
minutes of Sequence's Board of Directors and stockholders authorizing the
transactions contemplated by this Agreement shall have been delivered to
Monitoring.

10.3 Consents Obtained. All material consents,
authorizations and approvals required for the consummation of the transactions
contemplated under this Agreement shall have been obtained.

10.4 Good Standing Certificate. Monitoring shall have
received a certificate from the Secretary of State of the State of Oregon and
in all states where Sequence conducts business as a foreign corporation, dated
as close to the Closing Date as possible, stating that Sequence is an existing
Oregon corporation or a foreign corporation in good standing.

10.5 No Pending Litigation. There shall not be pending or
threatened any claim, proceeding, investigation or inquiry, by any person,
governmental body or authority, seeking to prevent or change the terms of, or
obtain damages in connection with, this Agreement or the transaction
contemplated hereby or which questions the validity or legality of the
consummation of the transaction contemplated hereby. No action or proceeding
relating to any item shall have been instituted or threatened prior to the
Closing Date that, if concluded adversely to the Sequence, would be materially
adverse to Monitoring's ownership of and operation of the Assets.

10.6 Payment of Secured Obligations. Monitoring shall
have received from Sequence satisfactory evidence from Sequence that all
liabilities of Sequence secured by or relating to the Assets shall have been
paid in full and that arrangement for the payment of Sequence's

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<PAGE> 17
Third Party Indebtedness by Monitoring in the amounts set forth in SCHEDULE 2.2
shall have been made upon terms and conditions satisfactory to Monitoring, in
which case Uniform Commercial Code termination statements or satisfactory
releases shall have been executed and delivered to Monitoring at Closing in
order to terminate or release all security interests or liens relating to the
Assets.

10.7 Transfer Documents. Sequence shall have executed and
delivered such bills of sale, assignments and other instruments of transfer, in
form and substance reasonably satisfactory to counsel for Monitoring, necessary
to assign, transfer and convey all of the Assets to Monitoring.

10.8 Registration Rights Agreement. Sequence shall have
executed the Registration Rights Agreement and Stockholders shall have each
executed the Affidavit and Agreement.

10.9 Opinion Letter of Sequence's Legal Counsel.
Monitoring shall have received the opinion of Sequence's legal counsel in a
form acceptable to Monitoring.

10.10 Miscellaneous. Monitoring shall have received all
consents and such additional instruments and documents as may reasonably be
required by this Agreement or to consummate the transactions contemplated
herein.

11. Conditions Precedent to Obligations of Sequence and
Stockholders. All obligations of Sequence and Stockholders at the Closing are
subject, at the option of Sequence or Stockholders, to the fulfillment prior to
or at the Closing by Monitoring of each of the following:

11.1 Payments. Sequence shall have received the Closing
Exchange Payment due at Closing pursuant to this Agreement.

11.2 Authorization of Monitoring. The Board of Directors
of Parent and Monitoring shall have approved or Sequence and Stockholders shall
have received assurances from Monitoring that the Board of Directors and
Stockholders of Parent and Monitoring shall ratify and approve as soon as
reasonably possible after the Closing Date, in accordance with their
Certificates of Incorporation and Bylaws (i) the Agreement and the execution
and delivery hereof by Monitoring and the Registration Rights Agreement and the
execution and delivery by Parent thereof, and (ii) the performance by
Monitoring of all of its obligations pursuant to this Agreement and by Parent
of all of its obligations under the Registration Rights Agreement. Certified
copies of the minutes of Parent's and Monitoring's Board of Directors
authorizing the transactions contemplated by this Agreement shall have been
delivered to Sequence and Stockholders or Monitoring shall have made
arrangements for their delivery to Sequence and Stockholders as soon as
reasonably possible after the Closing Date.

11.3 Registration Rights Agreement. Parent shall have
executed and delivered to Monitoring the Registration Rights Agreement.

12. Expenses. Monitoring, Sequence and Stockholders shall each
pay all of their own respective expenses incurred by or on behalf of each of
them in connection with this Agreement and the transactions contemplated
hereunder, including, but not limited to, all due diligence, legal and
accounting expenses.

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<PAGE> 18
13. Nature of Statements and Survival of Representations,
Warranties And Agreements. All statements of fact and only those statements of
facts contained in any written statement, certificate, exhibit, schedule or
other document delivered by or on behalf of the parties pursuant hereto or in
connection with the consummation of the transactions contemplated hereby are
deemed representations and warranties made hereunder. All covenants,
representations, warranties and agreements made by the parties hereunder shall
survive the Closing Date, the delivery of the Assets, and the dissolution and
liquidation of any party hereto and remain effective regardless of any
investigation at any time (whether before or after the date of this Agreement)
made by or on behalf of any party or of any information any party may obtain or
have (whether before or after the date of this Agreement) in respect thereof
and regardless of any non-exercise by a party of any rights hereunder.

14. Indemnification By Sequence and Stockholders.

14.1 Indemnification. Notwithstanding any investigation
by Monitoring, Sequence and Stockholders jointly and severally agree to
indemnify, hold harmless and defend Monitoring, including Monitoring's agents,
employees, officers, directors, and subsidiary and parent corporations
(collectively, the "Monitoring Parties"), from and against, and to reimburse
the Monitoring Parties with respect to, any and all losses, damages,
liabilities, costs and expenses, including interest, penalties and reasonable
attorney's fees, incurred by the Monitoring Parties, or any of them, by reason
of or arising out of or in connection with: (i) any breach or inaccuracy of
any representation or warranty of Sequence and Stockholders made in this
Agreement or the schedules or exhibits hereto, whether or not such
representation or warranty is qualified by Sequence's and Stockholders'
knowledge or limited to the best of Sequence's and Stockholders' knowledge;
(ii) the nonfulfillment or inadequate performance of any covenant or agreement
on the part of Sequence and Stockholders under this Agreement; (iii) any
liabilities of Sequence to third parties of any nature arising out of any act
performed or state of facts suffered to exist by Sequence on or prior to the
Closing Date, other than (a) Assumed Liabilities and (b) performance of the
duties and obligations under the Contracts after the Closing Date; (iv) any
claim or liability arising out of or related to the litigation and claims, or
threats thereof, including without limitation any litigation described on
SCHEDULE 5 or any litigation or claims arising out of or related to the
characterization of this transaction as a reorganization within the meaning of
the Internal Revenue Code of 1986, as amended; and (v) the failure by Sequence
or its predecessors to comply with, prior to the Closing Date, any "three (3)
day right of rescission" law or similar right of rescission or cancellation
statute covering any of the Alarm Accounts. This indemnification extends to
any losses suffered or costs incurred by the Monitoring Parties arising out of
or relating to claims pursuant to this Section 14.1, including, without
limitation, reasonable attorney's fees, whether or not a lawsuit is commenced
by any third party. Any claim for indemnification by any of the Monitoring
Parties pursuant to this Section 14.1 shall hereinafter be referred to as a
"Monitoring's Claim."

14.2 Survivability. In order for any Monitoring Parties
to be entitled to indemnification for a Monitoring's Claim as provided for in
Section 14.1, a notice of a Monitoring's Claim must be submitted to Sequence
and Stockholders within the following applicable time limitations:

(a) Except as provided in Section 14.2(b) or in
cases of fraud or intentional misrepresentation or of claims by Sequence's
current or former employees, a Monitoring's Claim pursuant to Section 14.1(i)
must be submitted on or before September 30, 1998;

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<PAGE> 19
(b) A Monitoring's Claim pursuant to Section
14.1(i) for a breach of Sections 5.1, 5.2, 5.5, 5.9 and 5.11 must be submitted
before the expiration of the applicable statute of limitations with respect to
such Monitoring's Claim; and

(c) All other Monitoring's Claims must be
submitted before the expiration of the applicable statute of limitations with
respect to such Monitoring's Claims.

14.3 Monitoring's Claim Basket and Liability Limit. With
the exception of Monitoring's Claims under Section 14.1(iv), Sequence's and
Stockholders' obligations with respect to indemnity pursuant to this section
shall be limited to the extent that the aggregate of such Monitoring's Claims
must first exceed Fifty Thousand Dollars ($50,000) ("Monitoring's Claim
Basket"). In no event shall the total liability of Sequence and Stockholders
for all Monitoring's Claims exceed the Exchange Price (including all Assumed
Liabilities paid, assumed and discharged by Monitoring) ("Sequence's Liability
Limit"); provided however, that any Monitoring's Claim resulting from
Sequence's and Stockholders' (or its designee's) failure to pay or otherwise
satisfy any of the Excluded Liabilities shall not be included in the
Monitoring's Claim Basket or Sequence's Liability Limit described in this
Section 14.3.

14.4 Notice; Tendering Defense to Sequence and
Stockholders. Sequence's and Stockholders' obligation to indemnify and
reimburse Monitoring hereunder are subject to prior written thirty (30) day
notice by Monitoring of a Monitoring's Claim, unless the Monitoring's Claim
involves litigation, in which case Monitoring shall provide Sequence and
Stockholders with notice of such litigation within twenty (20) days after
receipt of such complaint by Monitoring; provided, however, that Sequence and
Stockholders shall have the right to defend any Monitoring's Claim made by a
third party and Sequence, and Stockholders shall have the right to control the
defense, settlement or compromise of such Monitoring's Claim and Monitoring
shall have the right to be kept currently informed and to reasonably
participate in all aspects of such litigation to the extent deemed necessary to
protect Monitoring's interest, unless the amount of damages demanded or alleged
or prayed for in the complaint (or if no damages are demanded, alleged or
prayed for in the complaint, the damages reasonably likely to result from such
a Monitoring's Claim) exceeds the Sequence's Liability Limit, as such term is
defined in Section 14.3, in which case the party with the greatest economic
risk shall have the right to such control, subject to the other party's right
of information and participation. Notwithstanding anything to the contrary
contained in this Agreement, Monitoring shall control the defense, settlement
or compromise of any Monitoring's Claim where the damages demanded or alleged
or prayed for in the complaint (or if no damages are demanded or alleged or
prayed for in the complaint, the damages reasonably likely to result from such
a Monitoring's Claim) do not exceed the Monitoring's Claim Basket, and after
the Monitoring's Claim Basket has been exceeded, Monitoring shall control the
defense, settlement or compromise of any Monitoring's Claim where the damages
demanded or alleged or prayed for in the complaint do not exceed the sum of Two
Thousand Five Hundred Dollars ($2,500), and Sequence and Stockholders shall
have no right to be kept informed or to participate in such litigation.
Sequence and Stockholders shall also indemnify and hold harmless Monitoring
from, for and against any costs and expenses (including attorney's fees at
trial and in any appeal) which it may suffer or incur in connection with
enforcement of the indemnification obligation of the Sequence and Stockholders
hereunder.

14.5 Right of Setoff. In addition to the rights of
Monitoring under Sections 14.1 through 14.4, Sequence and Stockholders agree
that Monitoring shall have the right at any time following the Closing Date to
setoff against any amounts payable to Sequence under this Agreement an amount
equal to any and all losses, damages, liabilities, costs and expenses incurred

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<PAGE> 20
by Monitoring, including without limitation, reasonable attorney's fees, for
which Monitoring has a right to indemnification under Sections 14.1 through
14.4.

15. Indemnification by Monitoring.

15.1 Indemnification. Notwithstanding any investigation
by Stockholders, Monitoring agrees to indemnify, hold harmless and defend
Sequence and Stockholders, including Sequence's and Stockholders' agents
(collectively, the "Sequence Parties"), from and against, and to reimburse the
Sequence Parties with respect to, any and all losses, damages, liabilities,
costs and expenses, including interest, penalties and reasonable attorney's
fees, incurred by the Sequence Parties, or any of them, by reason of or arising
out of or in connection with: (i) any breach or inaccuracy of any
representation or warranty of Monitoring made in this Agreement or the
schedules or exhibits hereto, whether or not such representation or warranty is
qualified by Monitoring's knowledge or limited to the best of Monitoring's
knowledge, or (ii) the nonfulfillment or inadequate performance of any covenant
or agreement on the part of Monitoring under this Agreement. This
indemnification extends to any losses suffered or costs incurred by the
Sequence Parties arising out of or relating to claims pursuant to this Section
15.1, including, without limitation, reasonable attorney's fees, whether or not
a lawsuit is commenced by any third party. Any claim for indemnification by
any of the Sequence Parties pursuant to this Section 15.1 shall hereinafter be
referred to as a "Sequence's Claim."

15.2 Survivability. In order for any Sequence Parties to
be entitled to indemnification for a Sequence's Claim as provided for in
Section 15.1, a notice of a Sequence's Claim must be submitted to Monitoring
within the following applicable time limitations:

(a) Except in cases of fraud or intentional
misrepresentation, a Sequence's Claim pursuant to Section 15.1(i) must be
submitted on or before September 30, 1998; and

(b) All other Sequence's Claims must be submitted
before the expiration of the applicable statute of limitations with respect to
such Sequence's Claims.

15.3 Sequence's Claim Basket and Liability Limit.
Monitoring's obligations with respect to indemnity pursuant to this section
shall be limited to the extent that the aggregate of such Sequence's Claims
must first exceed Fifty Thousand Dollars ($50,000) ("Sequence's Claim Basket").
In no event shall the total liability of the Monitoring for all Sequence's
Claims exceed the Exchange Price (including all Assumed Liabilities)
("Monitoring's Liability Limit").

15.4 Notice; Tendering Defense to Monitoring.
Monitoring's obligation to indemnify and reimburse Sequence and Stockholders
hereunder is subject to prior written thirty (30) day notice by Sequence and
Stockholders of a Sequence's Claim, unless the Sequence's Claim involves
litigation, in which case Sequence and Stockholders shall provide Monitoring
with notice of such litigation within twenty (20) days after receipt of such
complaint by Sequence and Stockholders; provided, however, that Monitoring
shall have the right to defend any Sequence's Claim made by a third party, and
Monitoring shall have the right to control the defense, settlement or
compromise of such Sequence's Claim and Sequence and Stockholders shall have
the right to be kept currently informed and to reasonably participate in all
aspects of such litigation to the extent deemed necessary to protect Sequence's
and Stockholders' interests, unless the amount of damages demanded or alleged
or prayed for in the complaint (or if no damages are demanded, alleged or
prayed for in the complaint, the damages reasonably likely to result from such
a Sequence's Claim) exceeds the Monitoring's Liability Limit, in which case the

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<PAGE> 21
party with the greatest economic risk shall have the right to such control,
subject to the other party's right of information and participation.
Notwithstanding anything to the contrary contained in this Agreement, Sequence
and Stockholders shall control the defense, settlement or compromise of any
Sequence's Claim where the damages demanded or alleged or prayed for in the
complaint (or if no damages are demanded or alleged or prayed for in the
complaint, the damages reasonably likely to result from such an Sequence's
Claim) do not exceed the Sequence's Claim Basket, and after the Sequence's
Claim Basket has been exceeded, Sequence and Stockholders shall control the
defense, settlement or compromise of any Sequence's Claim where the damages
alleged or prayed for in the complaint do not exceed the sum of Two Thousand
Five Hundred Dollars ($2,500), and Monitoring shall have no right to be kept
informed or to participate in such litigation. Monitoring shall also indemnify
and hold harmless Sequence and Stockholders from, for and against any costs and
expenses (including attorney's fees at trial and in any appeal) which they may
suffer or incur in connection with enforcement of the indemnification
obligation of the Monitoring hereunder.

16. Transition Support. After the Closing Date and continuing for
a period of no less than ninety (90) days and no more than one hundred twenty
(120) days, Stockholders, at no cost to Monitoring, shall respond to
Monitoring's questions as necessary to assist Monitoring during such period
with the transition of Assets, business and operations to Monitoring as a
result of the transaction contemplated hereby. There will be no charge to
Monitoring for such transition assistance, other than reimbursement for
reasonable out-of-pocket expenses directly incurred in connection with any
travel or other expenses undertaken at the written request of Monitoring.

17. Miscellaneous.

17.1 Notices. Any and all notices, demands or other
communications required or desired to be given hereunder by any party shall be
in writing and shall be validly given or made to another party if served either
personally or if deposited in the United States mail, certified or registered,
postage prepaid, return receipt requested. If such notice, demand or other
communication is served personally, or by facsimile (with verbal verification
of complete receipt), service shall be conclusively deemed made at the time of
such personal service or facsimile transmission. If such notice, demand or
other communication is given by mail, such notice shall be conclusively deemed
given seventy-two (72) hours after the deposit thereof in the United States
mail addressed to the party to whom such notice, demand or other communication
is to be given as hereinafter set forth:

If to Sequence: Sequence Systems, Inc., dba Alltec Security Systems
7515 N.E. Ambassador Place, Suite C
Portland, Oregon 97220
Attention: Robert P. Thompson, President

If to Stockholders: Robert P. Thompson
George T. Nuttle
Donald A. Buss
7515 N.E. Ambassador Place, Suite C
Portland, Oregon 97220

If to Monitoring: Protection One Alarm Monitoring, Inc.
3900 S.W. Murray Boulevard
Beaverton, Oregon 97005
Attention: John W. Hesse

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<PAGE> 22
and

Protection One Alarm Monitoring, Inc.
6011 Bristol Parkway
Culver City, California 90230
Attention: John E. Mack, III

With a copy to: David R. Ludwig
Farleigh, Wada & Witt, P.C.
600 Bank of America Financial Center
121 S.W. Morrison Street
Portland, Oregon 97204

Any party hereto may change its address for the purpose of receiving notices,
demands and other communications as herein provided by a written notice given
in the manner provided hereby to the other party or parties hereto.

17.2 Modifications or Amendments. No amendment, change or
modification of this document shall be valid unless in writing and signed by
all parties hereto.

17.3 Waiver. No reliance upon or waiver of one or more
provisions of this Agreement shall constitute a waiver of any other provisions
hereof. All waivers must be in writing and signed by the party waiving
compliance.

17.4 Knowledge of Parties. Where any representation or
warranty contained in this Agreement is expressly qualified by a reference to
knowledge, information and/or belief of the party making such representation
and warranty, such party shall have made reasonable inquiry as to the matters
that are the subject of such representations and warranties.

17.5 Binding Effect. All of the terms and provisions
contained herein shall inure to the benefit of and shall be binding upon the
parties hereto and their respective heirs, personal representatives, successors
and, to the extent permitted by Section 17.6 assigns.

17.6 Assignment. Sequence and Stockholders may not assign
any rights or delegate any duties under this Agreement without the prior
written consent of Monitoring (including, without limitation, any rights in and
to the Deferred Exchange Payment), except that Sequence shall be entitled to
assign its rights under this Agreement to Stockholders pursuant to a plan of
liquidation adopted in connection with the dissolution of Sequence.

17.7 Separate Counterparts. This document may be executed
in one or more separate counterparts, each of which, when so executed, shall be
deemed to be an original. Such counterparts shall, together, constitute and
shall be one and the same instrument.

17.8 Further Assurances. Each of the parties hereto shall
execute and deliver any and all additional papers, documents and other
assurances, and shall do any and all acts and things reasonably necessary in
connection with the performance of their obligations hereunder and to carry out
the intent of the parties hereto.

17.9 Applicable Law; Severability; Attorney's Fees. This
Agreement shall, in all respects, be governed by the laws of the State of
Oregon applicable to agreements executed and to be wholly performed within the
State of Oregon. Nothing contained herein shall be construed

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<PAGE> 23
so as to require the commission of any act contrary to law, and wherever there
is any conflict between any provision contained herein and any present or
future statute, law, ordinance or regulation contrary to which the parties have
no legal right to contract, the latter shall prevail but the provision of this
document which is affected shall be curtailed and limited only to the extent
necessary to bring it within the requirements of the law. In the event any
action or arbitration is instituted by a party hereto to enforce or construe
any term or to recover damages resulting from the breach of any term of this
Agreement, the prevailing party in such action or arbitration shall be entitled
to such reasonable fees, costs and expenses (including the costs of the
arbitrator) as may be fixed by the court or arbitrator. The jurisdiction for
any arbitration or judicial proceedings brought by either party against the
other party with respect to this Agreement shall be Multnomah County, Oregon.

17.10 Arbitration. Either party may elect to require that
any controversy arising out of or relating to this Agreement be determined by
arbitration in accordance with the then effective commercial arbitration rules
of American Arbitration Association. All statutes of limitation which would
otherwise be applicable shall apply to the arbitration proceeding. Any
judgment upon the award rendered pursuant to arbitration may be entered in any
court having jurisdiction. In lieu of using the American Arbitration
Association, the parties may agree to select a single arbitrator who is
experienced in the alarm industry. If any legal action or other proceeding has
been brought by either party to construe, interpret or enforce this Agreement;
(i) the party who is the defendant or respondent in such proceeding shall be
deemed to have waived the option to arbitrate if a general appearance is made
in such proceeding prior to filing a claim in arbitration and (ii) the party
who is the plaintiff or petitioner in such proceeding shall be deemed to have
waived the option to arbitrate if a claim for arbitration is not filed within
sixty (60) days after a general appearance has been made by the adverse party
in such proceeding. If either party exercises the option to arbitrate,
arbitration shall be mandatory and any pending judicial proceeding shall be
stayed except to the extent permitted in this section.

17.11 Provisional Remedies. The following remedies may be
exercised by either party regardless of whether an arbitration proceeding is
then pending and without waiving any right to require arbitration: (i)
injunctive or other equitable relief to the extent such relief does not
conflict with any arbitration award; and/or (ii) setoff or recoupment.

17.12 Right to Use of Names. For a period of twenty-four
(24) months after the Closing Date, Sequence grants Monitoring the nonexclusive
right to use the names "Sequence Systems, Inc." and "Alltec Security Systems"
in connection with the transition of the Alarm Accounts and for no other
purpose. Sequence represents that it has the power and right to grant
Monitoring the rights granted in this Section 17.12.

17.13 Captions. Any captions to the sections of this
Agreement are solely for the convenience of the parties and are not a part of
this Agreement and shall not be used for the determination of the validity of
this Agreement or any provision therefor.

17.14 Entire Agreement; Waiver; Further Assurances. This
Agreement, together with any related documents referred to in this Agreement,
constitutes the entire understanding and agreement of the parties with respect
to the subject matter of this Agreement, and any and all prior agreements,
understandings or representations are hereby terminated and canceled in their
entirety. All of the terms and provisions contained herein shall inure to the
benefit of and shall be binding upon the parties hereto and their respective
heirs, personal representatives, successors and assigns. No reliance upon or
waiver of one or more provisions of this Agreement shall constitute a waiver of
any other provisions hereof. Each of the parties hereto shall execute

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<PAGE> 24
and deliver any and all additional papers, documents, and other assurances, and
shall do any and all acts and things reasonably necessary in connection with
the performance of their obligations hereunder and to carry out the intent of
the parties hereto.

17.15 No Third Party Beneficiaries. Nothing contained in
this Agreement shall be construed to give any person other than Monitoring,
Sequence and Stockholders any legal or equitable right, remedy or claim under
or with respect to this Agreement.

17.16 Time is of the Essence. Time is of the essence for
each and every provision of this Agreement.

17.17 Confidentiality. Each party shall hold in confidence
the fact of the existence of and all economic and other terms of this Agreement
and the transactions contemplated herein (collectively, "Confidential Terms").
The parties agree that disclosure of any Confidential Terms shall be limited
solely to management of and advisors to Monitoring, Sequence and Stockholders
on a "need to know" basis, and such management and advisors shall be advised of
and agree to be bound by the provisions of this Section 17.17. In furtherance
and not in limitation of the foregoing, no statements shall be issued regarding
this Agreement or the economic or other terms of the transactions contemplated
herein without the prior written consent of Monitoring, Sequence and
Stockholders. Notwithstanding anything to the contrary set forth in this
Agreement or any other documents executed by the parties, Monitoring is
authorized to disclose the existence of and all economic and other terms of
this Agreement in connection with any state or federal securities filings,
offering circulars, registration statements, or loan agreements of Monitoring
or Parent.

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<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first set forth above.

SEQUENCE: SEQUENCE SYSTEMS, INC., dba ALLTEC SECURITY SYSTEMS

By:
-------------------------------
Its:
------------------------------

STOCKHOLDERS:

----------------------------------
Robert P. Thompson

----------------------------------
George T. Nuttle

----------------------------------
Donald A. Buss

MONITORING: PROTECTION ONE ALARM MONITORING, INC.

By:
-------------------------------
Its:
------------------------------

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<PAGE> 1
EXHIBIT 2.2

AGREEMENT FOR STOCK PURCHASE

DATED: October 4, 1996

BETWEEN: Protection One Alarm Monitoring, Inc.
3900 SW Murray Blvd.
Beaverton, Oregon 97005 ("Buyer")

AND: Herbert H. Warrick, Jr.
Ramona L. Warrick
Russell E. VanDevanter
Maria M. VanDevanter ("Stockholders")

RECITALS

A. Stockholders are the owners of all of the issued and
outstanding shares of stock of all classes (the "SHI Stock") of Security
Holdings, Inc., a Washington corporation ("Company");

B. Buyer desires to purchase the SHI Stock from
Stockholders and Stockholders desire to sell all such shares of stock to Buyer
in exchange for shares of common stock (the "Pro One Stock") of Protection One,
Inc. ("Parent") on the terms and conditions hereinafter set forth.

NOW, THEREFORE, the parties hereto agree as follows:

1. Definitions. The following terms shall be defined as set
forth below:

1.1 Alarm Accounts.

The term "Alarm Accounts" is defined as all installed
monitored alarm accounts of the Company and all available records (including,
without limitation, service and installation records), files, computer
information, monitoring codes, upload codes, download codes, master codes,
lock-out codes, communicator identification codes and goodwill of the Company
related thereto, and any and all Contracts and related agreements for alarm
systems and services between the Company and Subscribers.

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<PAGE> 2
1.2 Accounts Receivable and Adjusted Accounts Receivable.

The term "Accounts Receivable" is defined as all accounts
receivable of Company relating to the Alarm Accounts invoiced by Company as of
September 30, 1996, excluding write offs. For purposes of determining the
amount of the Accounts Receivable in the Closing Price Components, as such term
is defined herein, any adjustments to the Purchase Price, as such term is
defined herein, the term "Adjusted Accounts Receivable" shall refer to (a) the
face amount of the Accounts Receivable aged from date of billing to 30 days
past due or for which an Unearned Income adjustment is made; (b) ninety percent
(90%) of the amount of all Accounts Receivable which are more than thirty (30)
days past due but less than or equal to sixty (60) days past due; and (c)
seventy percent (70%) of the amount of all Accounts Receivable which are more
than sixty (60) days past due. A detailed aged Accounts Receivable listing is
attached hereto as Schedule 1.2.

1.3 Assets.

The term "Assets" is defined as all of the tangible and
intangible assets of the Company as of the Closing as that term is defined in
Section 1.5, including those set forth on the Asset List attached hereto as
Schedule 1.3(a) which is dated as of September 30, 1996, and all other assets
acquired by Company from September 30, 1996 to the Closing Date, with the
exception of those tangible assets of the Company set forth on the Excluded
Asset List attached hereto as Schedule 1.3(b) which the Company has assigned to
Stockholders or other third parties prior to the Closing.

1.4 Assumed Liabilities.

The term "Assumed Liabilities" is defined as (i) all
obligations of Company to Subscribers to provide monitoring, warranty, repair
or other security services pursuant to written Contracts, as that term is
defined in Section 5.18, included in the Assets and (ii) all other liabilities
set forth on Schedule 1.4, as such schedule may be updated in the Final
Purchase Price Schedule, as such term is defined in Section 3.2.1, which shall
set forth (a) the liabilities which will not be deducted from the Purchase
Price and (b) the liabilities which will be deducted from the Purchase Price.
The Assumed Liabilities shall not include the liabilities set forth on the
schedule of Excluded Liabilities attached hereto as Schedule 1.4(c) which the
Company has assigned to Stockholders or other third parties prior to the
Closing.

1.5 Closing and Closing Date.

The terms "Closing" and "Closing Date" are defined as October
4, 1996, or such earlier date as the parties may mutually agree upon in writing
when the Closing of the purchase and sale of the SHI Stock is consummated. The
transfer to Buyer of control and the responsibility of

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<PAGE> 3
Company shall be effective as of 12:01 a.m. Pacific Daylight Savings Time on
the day following the Closing Date.

1.6 Closing Value.

The term "Closing Value" is defined as the average per share
closing price of Parent's shares of common stock for the fifteen (15) trading
days beginning on September 6, 1996, which is $13.392.

1.7 Deferred Payment.

The term "Deferred Payment" is defined as Nine Hundred
Twenty-Three Thousand Eight Hundred Sixty-Four and 75/100 Dollars
($923,864.75), which shall be twelve and one-half percent (12 1/2%) of the
Purchase Price, against which any Net Lost QRR, as that term is defined in
Section 3.3.2, shall be subtracted.

1.8 Environmental Laws.

The term "Environmental Laws" is defined as any and all
foreign and domestic federal, state and local laws (including case law),
regulations, ordinances, rules, judgments, orders, decrees, codes, injunctions,
permits, licenses, and governmental restrictions relating to the environment or
to emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes that affect human health and the environment or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, Hazardous
Substances or wastes or the clean-up or other remediation thereof.

1.9 Environmental Liabilities.

The term "Environmental Liabilities" is defined as all
liabilities, whether vested or unvested, contingent or fixed, which (i) arise
under or relate to Environmental Laws and (ii) relate to actions occurring or
conditions existing on or prior to the Closing Date.

1.10 Guaranty Period.

The term "Guaranty Period" is defined as the six (6) month
period following the Closing Date.

1.11 Hazardous Substances.

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<PAGE> 4
The term "Hazardous Substances" is defined as any toxic,
radioactive, caustic or otherwise hazardous substance regulated by any
Environmental Law, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any material constituent elements
displaying any of the foregoing characteristics.

1.12 Lost QRR.

The term "Lost QRR" is defined as the QRR (which was
determined as of the QRR Date) for any Qualified Accounts which were canceled
because a notice of cancellation, dispute or intent not to renew had been
received by Buyer or the Company, either orally (oral cancellations which are
not confirmed in writing shall not exceed 20% of the total of all Lost QRR) or
in writing, after the Closing Date and which relate to grossly negligent acts
or omissions of the Company occurring prior to the Closing Date and/or which
had an Accounts Receivable balance at least sixty (60) days past due at the
Closing Date which receivables balance due as of the Closing Date was not paid
in full on or before the expiration of the Guaranty Period and which had been
canceled or terminated by Buyer prior to the expiration of the Guaranty Period.
For purposes hereof, an Account Receivable balance is 60 days past due when it
has been unpaid for 60 days after the first day of the period for which the
invoiced services will be rendered. Lost QRR will not include Qualified
Accounts which are canceled due to the Subscriber moving and within sixty (60)
days of cancellation either the Subscriber signs a new monitoring agreement at
a new location or a new customer signs a new monitoring agreement at
Subscriber's original location. Lost QRR will not include Alarm Accounts which
cancel due to service or monitoring problems attributable to Buyer after the
Closing Date.

1.13 Material Adverse Effect.

The term "Material Adverse Effect" is defined as any change,
effect or occurrence that has, or is reasonably likely to have, individually or
in the aggregate, a material adverse impact on (i) the condition (financial or
otherwise) or prospects of the Company, its business or the Assets, or (ii) the
operation of the business before or after the Closing Date or the ownership or
other use of the Assets by Buyer and Company thereafter.

1.14 Nonqualified Accounts.

The term "Nonqualified Accounts" is defined as those Alarm
Accounts set forth on Schedule 4.4.2, as such schedule may be updated in the
Final Purchase Price Schedule.

1.15 Past Due Accounts.

The term "past due" means an account which is unpaid after the
first day of the period for which the invoiced services will be rendered. For
example, an account receivable balance is 90 days past due when it has been
unpaid for 90

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<PAGE> 5
days after the first day of the period for which the invoiced services will be
rendered.

1.16 Purchase Price and Closing Price Components.

The term "Purchase Price" is defined as Seven Million Three
Hundred Ninety Thousand Nine Hundred Seventeen and 97/100 Dollars
($7,390,917.97) (the total purchase price of $9,137,891.79 less Assumed
Liabilities of $1,746,973.82) which shall be subject to adjustments under
Section 3 hereof. The "Closing Price Components" shall be derived pursuant to
the items set forth in Schedule 1.16 (the "Closing Purchase Price Schedule")
for the QRR of the Qualified Accounts as of September 30, 1996 (the "QRR
Date"), cash and cash equivalents, short term investments, Adjusted Accounts
Receivable, and prepaid expenses and deposits, less Unearned Income as of the
QRR Date and less Assumed Liabilities described in subparagraph (b) of Schedule
1.4, accounts payable, dividends payable, accrued liabilities, accrued interest
and deferred revenues.

1.17 QRR.

The term "QRR" is defined as the gross monthly recurring
revenue of the Qualified Accounts, as such term is defined herein, under valid
Contracts, as such term is defined in Section 5.18, and including the Alarm
Accounts without written Contracts listed in Schedule 4.4.3, for the leasing,
monitoring and servicing of alarm systems which are in full force and effect as
of the Closing Date, do not contain restrictions or limitations against
assignment to Buyer and which have receivable balances which are current or no
more than one hundred twenty (120) days past due; provided however, that
certain regular slow paying Alarm Accounts with receivables balances which are
more than one hundred twenty (120) days past due shall be acceptable to Buyer
for inclusion in QRR and shall be identified in Schedule 4.4.4 (the "Slow Pay
Accounts"). QRR does not include any amounts derived from or which are
expected to be derived from: (a) services to be provided under any Contract or
oral agreement which by its terms is terminable and has been terminated by a
Subscriber as a result of the consummation of the transaction contemplated
hereby; (b) services to be provided under any Contract or oral agreement as to
which verbal or written notice of cancellation, termination or non-renewal has
been received prior to the Closing; (c) time and materials charges or any other
like charges for non-recurring, non-regular services; (d) reimbursement for or
prepayment of leased telephone line charges associated with the Qualified
Accounts; (e) reimbursement for or prepayment of any false alarm assessments;
and (f) reimbursement for or prepayment of any taxes, fees, increased
monitoring charges or other charges imposed by any governmental authority with
respect to the furnishing of alarm services. Assuming the Closing occurs on or
before October 4, 1996, the QRR and Unearned Income shall be determined as of
September 30, 1996. Quarterly, semi-annual and annual billings shall be
divided by three, six and twelve, respectively, to determine the monthly
recurring revenue amount.

1.18 Qualified Accounts.

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<PAGE> 6
The term "Qualified Accounts" is defined as the Alarm Accounts
set forth on Schedule 4.4.1, as such schedule may be updated in the Final
Purchase Price Schedule.

1.19 Replacement Accounts.

The term "Replacement Accounts" means a monitored alarm
contract, including all leased equipment related thereto, and any and all
related agreements for leasing, installation, maintenance, servicing and/or
monitoring of alarm systems owned by Stockholders or the following designated
company, Hugh Edward Enterprises, Inc., after the Closing Date which is used to
replace Lost QRR under Section 3.3.3 of this Agreement. As of the date of
transfer of each Replacement Account to Buyer or Company, all terms,
conditions, and representations applicable to the Alarm Accounts shall apply in
all material respects to each Replacement Account.

1.20 Subscriber.

The term "Subscriber" is defined as any person, business,
corporation or other entity that has an Alarm Account with the Company for the
provision of alarm and monitoring services.

1.21 Taxes.

The term "Taxes" is defined as any and all federal, state,
local, foreign, or other taxes (including all those related to income, gross
receipts, franchise, excise, sales and use, social security, unemployment,
workers' compensation, ad valorem, and property taxes).

1.22 Telephone Lines.

The term "Telephone Lines" is defined as Company's interest in
all of the telephone lines, voice service lines, call back lines and numbers on
which the Alarm Accounts are being monitored or which are otherwise used or
owned by Company in connection with the business. All of the telephone numbers
for the Telephone Lines are listed in Schedule 1.22.

1.23 Unearned Income.

The term "Unearned Income" is defined as: (i) all Accounts
Receivable billed by the Company for services to be rendered on or after the
Closing to the Alarm Accounts by Buyer; and (ii) payments and deposits received
by the Company prior to the Closing, for services to be rendered on or after
the Closing to the Alarm Accounts by Buyer.

2. Agreement to Purchase and Sell Stock.

2.1 Purchase and Sale of SHI Stock.

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<PAGE> 7
In reliance upon the warranties, representations and covenants
of Stockholders contained in this Agreement, and subject to the provisions in
this Agreement, Buyer agrees to purchase from Stockholders at the Closing all
of the issued and outstanding shares of all classes of SHI Stock of Company in
exchange for such number of shares determined below of Pro One Stock. In
reliance on the warranties, representations and covenants of Buyer contained in
this Agreement, and subject to the provisions in this Agreement, Stockholders
agree to sell to Buyer at the Closing all of the SHI Stock in exchange for such
number of shares determined below of Pro One Stock.

2.2 Exchange of SHI Stock for Pro One Stock.

The exchange of SHI Stock for Pro One Stock shall be effected
by means of the Plan of Share Exchange, in the form attached as Schedule 2.2,
which is attached hereto and incorporated herein. The exchange is intended to
qualify as a tax-free reorganization under Internal Revenue Code Section
368(a)(1)(B).

3. Purchase Price and Adjustments to Purchase Price.

3.1 Payment of the Purchase Price.

The Purchase Price shall be paid to Stockholders as follows:

3.1.1 Closing Purchase Price.

On the Closing Date, Buyer shall pay to Stockholders
the Closing Purchase Price by delivering such number of shares of Pro One Stock
multiplied by the Closing Value to equal the sum of Six Million Four Hundred
Sixty-Seven Thousand Fifty-Three and 22/100 Dollars ($6,467,053.22) (the
"Closing Payment"), which shall be eighty-seven and one-half percent (87 1/2%)
of the Purchase Price. Upon request of any of the Stockholders, the share
certificates of Pro One Stock issued to such Stockholder at Closing as the
Closing Payment may, after the earlier of thirty (30) days after the Closing
Date or the effective date of the Registration Statement for the Pro One Stock,
be surrendered and reissued, to the extent practicable, one-half in increments
of one thousand (1000) share certificates and one-half in increments of five
thousand (5000) share certificates. Rather than issue fractional shares of Pro
One Stock, Buyer will pay in cash the amount of any fractional shares of Pro
One Stock to which any of the Stockholders would be entitled. The Closing
Payment may be subject to adjustments in accordance with Section 3.2 within one
hundred twenty (120) days after the Closing Date. The Closing Payment shall be
allocated among the Stockholders in accordance with par value for the preferred
stock and their percentage ownership of SHI Common Stock as follows:

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<PAGE> 8
NAME OF STOCKHOLDER PERCENTAGE OWNERSHIP

Russell E. VanDevanter 46.75% common
Maria M. VanDevanter 100% preferred and 3.25% Common
Herbert H. Warrick, Jr. and
Ramona L. Warrick, as community
property 50% common

3.1.2 Deferred Purchase Price.

On the Closing Date, Buyer shall deliver in trust
with Mills Meyers Swartling ("Escrow Agent") in Seattle, Washington such
number of shares of Pro One Stock multiplied by the Closing Value plus the
amount of fractional shares in cash to equal the sum of Nine Hundred
Twenty-Three Thousand Eight Hundred Sixty-Four and 75/100 Dollars ($923,864.75)
(the "Deferred Payment"), which shall be twelve and one-half percent (12 1/2%)
of the Purchase Price. Upon request of any of the Stockholders, the share
certificates of Pro One Stock issued to such Stockholder at Closing as the
Deferred Payment may, after the earlier of thirty (30) days after the Closing
Date or the effective date of the Registration Statement for the Pro One Stock,
be surrendered to the Escrow Agent and reissued, to the extent practicable,
one-half in increments of one thousand (1000) share certificates and one-half
in increments of five thousand (5000) share certificates. Rather than issue
fractional shares of Pro One Stock, Buyer will pay to the Escrow Agent in cash
the amount of any fractional shares of Pro One Stock to which any of the
Stockholders would be entitled. The Deferred Payment shall be delivered to
Stockholders by the Escrow Agent within thirty (30) days after the end of the
Guaranty Period, subject to adjustments in accordance with Section 3.2 and
Section 3.3. The Deferred Payment shall be allocated among the Stockholders in
accordance with their ownership of SHI Stock as set forth in Section 3.1.1.
The Stockholders will have the right to vote the shares held by Escrow Agent.

3.2 Purchase Price Adjustments.

The Purchase Price, including the Closing Payment and Deferred
Payment shall be subject to adjustments as follows:

3.2.1 Final Purchase Price Schedule.

On or before the ninetieth (90th) day after the
Closing Date, Buyer will prepare and deliver to Stockholders Schedule 3.2.1
(the "Final Purchase Price Schedule"), setting forth any adjustments to the
Purchase Price based upon any changes, differences, or discrepancies in the
Closing Price Components as scheduled or represented herein as of the Closing
Date. If Stockholders disagree with any adjustments shown on the Final
Purchase Price Schedule, they shall notify Buyer and Escrow Agent within
fourteen (14) days of receipt of the Final Purchase Price

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<PAGE> 9
Schedule by a written notice setting forth the basis for the disagreement. Any
differences regarding the Final Purchase Price Schedule not resolved by the one
hundred and twentieth (120th) day after the Closing Date shall be resolved in
accordance with Section 15.

3.2.2 Purchase Price Adjustment.

In the event the Closing Price Components set forth
in the Final Purchase Price Schedule are more or less than the Closing Price
Components used to calculate the Purchase Price at Closing, then and in such
event, the Purchase Price, Closing Payment and Deferred Payment shall be
adjusted upwards or downwards accordingly. Any changes in the QRR shall be
multiplied by a factor of forty-five (45) in order to determine the change in
the Purchase Price. If the Purchase Price is adjusted upward as a result of
the calculations set forth in the schedule, Buyer shall, concurrently with the
delivery of the schedule, deliver additional shares of Pro One Stock to
Stockholders and to the Escrow Agent to appropriately adjust the Closing
Payment and Deferred Payment; and if the Consideration is adjusted downward as
a result of the calculations set forth in the Final Purchase Price Schedule,
Stockholders shall, within ten (10) days of receipt of the schedule, return to
Buyer sufficient shares of Pro One Stock to correct the Closing Payment and
hereby consent to the return of sufficient shares of Pro One Stock held in
trust by the Escrow Agent to correct the Deferred Payment.

3.3 QRR Guaranty.

3.3.1 Guaranty Period and QRR Guaranty.

Stockholders hereby guaranty the QRR of the Qualified
Accounts for the term of the Guaranty Period, subject to the terms and
provisions contained in this Section 3.3 (the "QRR Guaranty").

3.3.2 Calculation of QRR Guaranty Payment.

Within sixty (60) days after the end of the Guaranty
Period, Buyer shall determine the Net Lost QRR by subtracting the QRR of
Replacement Accounts from all Lost QRR. Buyer shall determine the amount
payable under the QRR Guaranty by multiplying the Net Lost QRR by a factor of
forty-five (45) (the "QRR Guaranty Payment") and shall prepare and deliver to
Stockholders a written statement showing the computation of the QRR Guaranty
Payment.

3.3.3 Replacement Accounts.

During the Guaranty Period, Buyer shall provide to
Stockholders, on or before the fifteenth (15th) day of each month, a report
("QRR Report") listing the Lost QRR ("Monthly Lost QRR") for the previous full
calendar month. If Stockholders desire to transfer Replacement

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<PAGE> 10
Accounts to Company to replace Monthly Lost QRR, then Stockholders must
transfer such Replacement Accounts to Company within thirty (30) days after the
date of such monthly QRR Report and before the forty-fifth (45th) day after the
end of the Guaranty Period; provided however, that at least fifty percent (50%)
of any Replacement Accounts transferred to Company after the end of the
Guaranty Period must be originated or have been originated by Company or Hugh
Edward Enterprises, Inc. and the remaining 50% may be acquired from another
security alarm company approved by Buyer. The QRR for Replacement Accounts
transferred to Company shall not exceed the Monthly Lost QRR set forth in the
QRR Report dated within thirty (30) days prior to the date of each transfer of
Replacement Accounts. Each Replacement Account must be located in Buyer's
existing market areas of Washington, Oregon, California, Arizona, New Mexico
and Nevada or in Northwestern Idaho, and shall meet the representations agreed
to herein which are applicable to the Qualified Accounts, including without
limitation, the definitions of Alarm Accounts and QRR, as of the date of
transfer of the Replacement Account. Buyer will not accept as Replacement
Accounts any accounts which are subject to oral agreements or which are more
than 30 days past due as of the date of transfer to Buyer. In addition, on the
date each Replacement Account is transferred to Company, there shall be no more
than two (2) months of either free monitoring service or of prepaid monitoring
service. Each Replacement Account shall be transferred to Company pursuant to
a form contract expressly approved by Buyer, one utilized by Buyer or a form
substantially similar to Buyer's form contract; provided however, that Hugh
Edward Enterprises, Inc. may submit up to one hundred (100) alarm accounts
documented on Company's current forms, assuming they meet the other conditions
set forth herein for Replacement Accounts, but any additional Replacement
Accounts shall be documented on contract forms approved by Buyer. Upon
transfer to Company of a Replacement Account which conforms to the requirements
set forth herein, the Replacement Account shall be deemed to be a Qualified
Account, and shall be subject to all terms, conditions, representations and
warranties set forth in this Agreement as it relates to the Qualified Accounts.
Contemporaneously with the transfer of the Replacement Account to Company,
Stockholders shall also deliver to Company all contracts, records, information
and documents which Buyer may reasonably require in order to take possession
and control of the Replacement Account and to provide monitoring service.
Stockholders shall execute such documents as Buyer shall reasonably require to
evidence Company's ownership of the Replacement Accounts and the alarm system
equipment related thereto if it is owned by Stockholders. The Replacement
Accounts will be monitored by Alarm Monitoring Systems on one of the telephone
lines which will be transferred to Buyer in accordance with the agreements
attached as Schedule 8.4. In the event the Replacement Account must be
reprogrammed in order to be monitored by Buyer's central monitoring station,
Stockholders shall reprogram, at their cost, each Replacement Account within
fifteen (15) days after transfer to Company of the Replacement Account.

3.3.4 Transfer of Lost QRR Customer Files to
Stockholders.

Within fifteen (15) days after the end of each month
during the Guaranty Period, Buyer will transfer to Stockholders, without
recourse or warranty of any kind, the customer

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<PAGE> 11
files for those Subscribers whose accounts have been canceled or terminated
during the Guaranty Period and for which an adjustment to the Deferred Payment
was made. Buyer reserves the right to collect past-due charges, Buyer's
customary cancellation fee, and any other amounts due under the Contracts with
the Subscribers, on any terms or conditions deemed acceptable by Buyer, in its
sole discretion. Buyer makes no representations regarding the canceled or
terminated accounts transferred to Stockholders hereunder, and Stockholders
acknowledge and agree that Buyer shall have no liability to Stockholders if the
Subscribers of these canceled or terminated accounts fail to renew, reinstate
or reaffirm their alarm account contracts with Stockholders.

3.3.5 Payment of Balance of Deferred Payment.

Buyer shall instruct Escrow Agent to pay to
Stockholders in sufficient shares of Pro One Stock, in accordance with their
ownership percentage of SHI Stock, seventy (70) days after the end of the
Guaranty Period any positive Deferred Payment balance (after any adjustments
under Section 3.3.2) remaining after subtracting the QRR Guaranty Payment.
Seventy (70) days after the end of the Guaranty Period, Escrow Agent shall pay
to Buyer in sufficient shares of Pro One Stock the amount of the Deferred
Payment equal to the QRR Guaranty Payment and such shares shall thereupon be
canceled by Parent. In the event the share certificates of Pro One Stock need
to be reissued in order to allow distribution of the QRR Guaranty Payment to
Buyer and distribution of the remaining positive Deferred Payment to
Stockholders, Escrow Agent shall deliver to Buyer sufficient share certificates
of Pro One Stock, to enable Buyer to obtain sufficient shares of Pro One Stock
reissued, to the extent practicable, one-half in increments of one thousand
(1000) share certificates and one-half in increments of five thousand (5000)
share certificates to make the payments due to the parties hereunder. Rather
than issue fractional shares of Pro One Stock, Buyer will pay to the Escrow
Agent in cash the amount of any fractional shares of Pro One Stock to which any
of the Stockholders would be entitled. For purposes of calculating the number
of shares of Pro One Stock which from which the QRR Guaranty Payment will be
deducted, each share of Pro One Stock will be valued at the Closing Value,
rather than the current market value or trading price at the end of the
Guaranty Period. Any disputes regarding the QRR Guaranty Payment and Deferred
Payment shall be resolved in accordance with Section 15. Stockholders shall
notify Buyer and Escrow Agent of any dispute relating to the QRR Guaranty
Payment within fourteen (14) days after delivery of the schedule. If there is
such a dispute, the Escrow Agent shall not deliver to any party any payment of
the Deferred Payment or QRR Guaranty Payment, except for any sums mutually
agreed to by Stockholders and Buyer, until the dispute has been resolved by
arbitration and all time periods for appealing any arbitrator's award have
expired or upon written confirmation to the Escrow Agent that the parties have
resolved the dispute. If the QRR Guaranty Payment exceeds the Deferred
Payment, then Buyer shall have no obligation to pay any of the Deferred Payment
to Stockholders, and Stockholders shall have no obligation to pay to Buyer the
amount by which the QRR Guaranty Payment exceeds the Deferred Payment.

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<PAGE> 12
4. Schedules Delivered at Closing.

In addition to other schedules specified herein, Stockholders have
prepared and hereby deliver the following schedules to Buyer which are attached
to this Agreement and made a part hereof:

4.1 Schedule of Third Party Guarantees.

A schedule setting forth, in detail, all third party
guarantees related to any alarm monitoring accounts purchased by Company,
including all accounts purchased as a result of the acquisition of the assets
of third parties and all accounts which have been separately purchased by
Company.

4.2 Schedule of Contracts and Agreements.

A schedule setting forth, in detail, all of the non-compete
agreements or covenants, non-solicitation agreements or covenants and
consulting agreements and other agreements between Company and third parties
relating to Company's acquisition of QRR.

4.3 Schedule of Restrictive Agreements.

A schedule setting forth, in detail, all contracts, agreements
or understandings to which (a) Company is a party or (b) Company is in any way
bound, and which in any way restrict or purport to restrict Company's business
whether with specified persons or in specified areas or otherwise.

4.4 Schedule of Alarm Accounts.

The following schedules in no way modify, amend, change or
limit the definition of QRR and may be amended in the Final Purchase Price
Schedule:

4.4.1 Qualified Accounts.

A schedule setting forth, in detail, the Alarm
Accounts which are within the definition of QRR and have been signed by
customers on valid Contracts.

4.4.2 Nonqualified Accounts.

A schedule setting forth, in detail, the Alarm
Accounts which are not included in the QRR but included in the Assets.

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4.4.3 [Reserved]

4.4.4 Slow Pay Accounts.

A schedule setting forth, in detail, the Alarm
Accounts which are Slow Pay Accounts which are included in the QRR.

4.5 Schedule of Physical Inventory.

A schedule setting forth, in detail, the record of physical
inventory of Company as of September, 1996.

4.6 Schedule of Closing Work in Process.

A schedule setting forth, in detail, the Company's agreements
and status of any work in progress relating to the installation of alarm
systems.

5. Representations, Warranties and Agreements of Stockholders.

Except as otherwise set forth or described on Schedule 5
("Stockholders Disclosure Schedule") or any other Schedule or Exhibit attached
hereto, Stockholders agree, represent and warrant as follows as to Sections 5.1
through 5.5 and Herbert H. Warrick, Jr. and Russell E. VanDevanter agree,
represent and warrant as follows as to Sections 5.6 through 5.37:

5.1 Corporate Status of Company.

Company is a corporation duly organized and validly existing
under the laws of the State of Washington. On September 29, 1996, Company
distributed the stock of its wholly-owned subsidiary, Alarm Monitoring
Services, Inc., to Company's Shareholders of common stock, pro rata in
accordance with common shareholdings. The distribution was undertaken to
facilitate the acquisition of Company by Buyer, and qualified as a tax-free
corporate separation under Internal Revenue Code Section 355. As of the
Closing Date, Company does not have any subsidiaries, and does not own any
securities of, or have any proprietary interest in, any other entity. Company,
as a result of the character and location of the Assets and the nature of the
business conducted by it, is qualified to conduct business in Washington and
Oregon as a foreign corporation. Company has full corporate power and
corporate authority to own, or hold under lease, the Assets and is qualified to
conduct business in all jurisdictions except where the failure to qualify would
not materially adversely affect the business of Company.

5.2 Outstanding Stock of Company.

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The authorized capital stock of Company consists of 1,000
shares of common stock, $1.00 par value per share, of which 400 shares are
issued and outstanding; and 4,000 shares of $100 par value preferred stock, of
which 3,145 shares are issued and outstanding. All of Company's issued and
outstanding shares of stock have been validly issued to Stockholders and are
fully paid and non-assessable and are not subject to any preemptive or other
similar rights. There are no accrued and unpaid dividends on the preferred
stock. Stockholders are the owners, beneficially and of record, of all of the
issued and outstanding shares of Company free and clear of all restrictions of
any kind, nature or description. Company has not authorized or issued any
securities other than to Stockholders, and no person, corporation, or entity
holds any option, warrant or right to purchase or otherwise acquire any shares
of capital stock of Company. Stockholders have not entered into any agreement
with any former stockholder of Company, if any, regarding the sale, transfer or
disposition of the capital stock or Assets of Company or in any manner
affecting the capital stock or Assets of Company.

5.3 Corporate Documentation.

Stockholders have furnished Buyer with a true and complete
copy of Company's articles of incorporation, certified by the Washington
Secretary of State, a true and complete copy of Company's By-Laws, certified by
the Secretary of Company, a certificate of the Washington Secretary of State
evidencing the due organization and valid existence of Company under the laws
of its State of Incorporation and a certificate of the Secretary of State of
each jurisdiction in which the Company is qualified as a foreign corporation,
stating that the Company is authorized to transact business in such State and
is a foreign corporation in good standing. In addition, the Company's stock
transfer records and corporate records of the meetings of the directors and
stockholders of the Company which have been delivered to Buyer are true,
accurate and complete and reflect all issues and transfers of stock to date and
all actions and proceedings of such bodies to date.

5.4 Authorization of Stockholders.

This Agreement has been duly executed and delivered by
Stockholders and constitutes a valid obligation legally binding on Stockholders
and is enforceable against Stockholders in accordance with its terms, except as
enforceability may be limited or affected by applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting
the rights of creditors and except as enforceability may be limited by rules of
law governing specific performance, injunctive relief or other equitable
remedies. The execution, delivery and performance of this Agreement by
Stockholders and the consummation of the transactions contemplated hereby by
Stockholders do not and will not conflict with, or result in a breach,
default, violation or loss of a material benefit under any agreement, mortgage,
lease, license or other instrument or obligation of Stockholders or the Company
in connection with the operation of the Company's business or any of the
Assets; do not require the consent or permission of any person or governmental
agency; and will not violate any law, rule or regulation of any agency or

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<PAGE> 15
governmental body to which Stockholders or Company is subject and that is
individually or in the aggregate material to the transactions contemplated
hereby. No registration, declaration or filing with any governmental or
administrative authority is required on the part of Stockholders or Company in
connection with the execution, delivery and performance of this Agreement.

5.5 Title to Stock.

Stockholders have good and valid title to the SHI Stock, free
and clear of all liens, claims, charges, or other encumbrances, with full
lawful right, power, capacity and authority to sell, assign, transfer and
deliver the certificates for the SHI Stock to Buyer pursuant to this Agreement
and to consummate the transactions contemplated hereby, and there are no
agreements, arrangements or understandings restricting or otherwise relating to
the transfer or voting of the SHI Stock. At the Closing, Buyer will receive
good and valid title to the SHI Stock, free and clear of all liens, claims,
charges or other encumbrances of any nature whatsoever.

5.6 Assets.

To Stockholders' knowledge, the Asset List is true, accurate
and complete and sets forth a complete and an accurate listing of all of the
material intangible and tangible operating assets of the Company as of
September 30, 1996 which are used in the Company's business, with the exception
of the assets set forth on the Excluded Asset List. The only material tangible
and intangible operating assets of the Company are the Assets.

5.7 Excluded Assets.

All of the Company's right, title and interest in the assets
of the Company set forth on the Excluded Asset List have been assigned to
Stockholders or their designee, and Stockholders or their designee have
acknowledged receipt of such assets.

5.8 Assumed Liabilities.

To Stockholders' knowledge, the schedule of Assumed
Liabilities is true, accurate and complete and sets forth a complete and an
accurate listing of all accrued, absolute, and contingent liabilities of the
Company as of the Closing Date. The Company has no obligations, indebtedness
or liabilities, contingent or otherwise, other than (i) those disclosed or
adequately reserved for in the Financial Statements (defined in Section 5.10);
(ii) those expressly described or listed in the schedules hereto; (iii)
immaterial obligations, indebtedness or liabilities arising in the ordinary
course of business and not required by generally accepted accounting principles
to be recorded in financial statements or notes thereto; and (iv) liabilities
incurred since September 30, 1996 in the ordinary course of business consistent
with past practices.

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<PAGE> 16
5.9 Excluded Liabilities.

All of the liabilities set forth on the Excluded Liabilities
List have been assumed by Stockholders or their designee, and the Company has
been released in writing from any liability therefrom.

5.10 Financial Statements.

Stockholders have heretofore delivered to Buyer a copy of the
Company's financial statements dated as of September 30, 1996 ("Financial
Statements"), a copy of which is included in Schedule 5. The Financial
Statements include, among other things, a balance sheet of the Company dated as
of September 30, 1996 and the related internal statement of income and retained
earnings and changes in financial position for the period ended September 30,
1996. The Financial Statements accurately present the financial position,
results of the operations, and the changes in financial position of the Company
for the periods indicated; were accurately prepared from the books and records
of the Company in accordance with the accounting policies then in effect; and
have been prepared on a consistent basis with past periods, all subject to
year-end adjustment, which adjustment in the aggregate shall not materially
affect the results contained therein.

5.10.1 Changes in Business.

Except as expressly allowed or contemplated by this
Agreement, since the date of the Financial Statements, Company has conducted
its business in the ordinary course and there has not occurred:

(i) Any Material Adverse Effect with respect to the
Company;

(ii) Any amendments or changes in the Company's Articles
of Incorporation or Bylaws;

(iii) Any redemption, repurchase or other acquisition of
shares of capital stock of the Company or any declaration, setting
aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to the capital stock of the
Company;

(iv) Any increase in or modification of the compensation
or benefits payable or to become payable by the Company to any of its
directors, employees or consultants, except in the ordinary course of
business consistent with past practice, which past practice has been
previously disclosed in writing to Buyer;

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<PAGE> 17
(v) Any acquisition, sale or disposition of property or
assets by or of Company, except in the ordinary course of business; or

(vi) Any entry into, amendment of, relinquishment,
termination or non-renewal by Company of any Contracts, lease
transaction, commitment or other right or obligation other than in the
ordinary course of business; or

(vii) Any agreement or arrangement made by the Company to
take any action after the date hereof which, if taken prior to the
date hereof, would have made any representation or warranty set forth
in this Section 5.10 untrue or incorrect as of the date hereof.

5.10.2 Undisclosed Liabilities.

To the best knowledge of the Stockholders, there are no
liabilities or obligations of any nature of Company, due or to become due,
determined or determinable, absolute, accrued, contingent, or otherwise, and
there are no conditions, situations, or circumstances that have existed, are
existing, or that could reasonably be expected to result in any such
liabilities or obligations, except, in any such event, (i) as, and to the
extent, set forth or specifically reserved against on the Financial Statements,
(ii) liabilities incurred since the date of the Financial Statements in the
ordinary and usual course of business consistent with past practice (none of
which is a material uninsured liability for breach of contract, breach of
warranty, tort or infringement claim, violation of law or lawsuit) and (iii)
liabilities incurred in connection with or contemplated by this Agreement or
listed in the schedules attached hereto.

5.11 Taxes and Tax Filings.

Company has duly and timely filed when due, or will have
timely filed on or before the Closing Date, all returns, reports, declarations
and applications ("Returns"), relating to all Taxes required to be filed by
Company (including, without limitation, with respect to estimated Taxes, excise
Taxes and informational returns) relating to periods through the Closing Date.
All such Returns filed before the Closing Date were, when filed, true,
accurate, and complete and reflect all Taxes payable by Company. Company has
paid or, if payment is not yet due, has established adequate reserves for the
payment of all Taxes, assessments, deficiencies, levies, duties, license fees,
registration fees, withholdings, and all similar governmental charges for
periods through the Closing Date, and any interest, penalties, or additions to
tax imposed thereon in each case, whether disputed or not and whether due or
claimed to be due by any taxing authority from Company.

Except as set forth in Schedule 5, no Return required to be
filed by Company has been audited by any taxing authority. There is no action,
suit, proceeding, audit, investigation, or claim pending or threatened in
respect of any Taxes for which Company is or may become liable, nor has any
deficiency or claim for any Taxes been imposed or assessed. There are no
outstanding

Page 17 - AGREEMENT FOR STOCK PURCHASE
<PAGE> 18
notices of deficiencies, adjustments, changes in assessments, or, to the best
knowledge of the Stockholders, increases in tax rates with respect to any
Taxes. Company has not waived any statute of limitations with respect to any
taxable year. There is no agreement, waiver, or consent providing for an
extension of time with respect to the assessment of any Taxes against Company.

Company has timely paid, withheld or otherwise collected, or
made provision on its books for all Taxes due and payable with respect to all
taxable periods ending on or prior to the Closing Date and for the relevant
portion (ending on the Closing Date) of any taxable period beginning prior to
the Closing Date and ending after the Closing Date. There are no liens for
Taxes upon the Assets of Company, except liens for current Taxes not yet due.

To the best of the Stockholders' knowledge, Company will not
be required to include any adjustment in taxable income for any Tax period (or
portion thereof) ending after the Closing Date pursuant to Section 481(c) of
the Internal Revenue Code (or any similar provision of the Tax laws of any
jurisdiction) as a result of a change in method of accounting for any Tax
period (or portion thereof) ending on or before the Closing Date or pursuant to
the provisions of any agreement entered into with any taxing authority with
regard to the Tax liability of Company for any Tax period (or portion thereof)
ending on or before the Closing Date.

Except for Alarm Monitoring Services, Inc. and Preferred
Products Distribution, Inc., a subsidiary which has been dissolved, Company is
not and has not been a member of an affiliated group parent, or filed or been
included in a combined, consolidated or unitary Tax return or participated in
any other similar arrangement whereby any income, revenues, receipts, gains,
losses, deductions, credits or other Tax items of Company was determined or
taken into account for Tax purposes with reference to or in conjunction with
any such items of any other person.

Except as set forth on Schedule 5, Company is not currently
under any contractual obligation to pay the income or franchise tax obligations
of, or with respect to transactions relating to, any other person or to
indemnify any other person with respect to any income or franchise tax.
Company has not signed any letter or entered into any agreement or arrangement
in writing consenting to the surrender or sharing of any deductions, credits,
or other Tax attributes with any other person or transferred or assigned to any
other person for Tax purposes any such item.

5.12 Leases and Agreements.

5.12.1 Real Property Leases.

A complete list of all of the Company's real property
leases (except those on the Excluded Asset List and Excluded Liabilities List)
are included in the Asset List and Assumed Liabilities, and copies of all such
leases, amendments, modifications, waivers and addenda thereto have been
provided to Buyer. The Company has not owned and does not currently own any
real

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<PAGE> 19
property. Except for leases on the Excluded Asset List and Excluded
Liabilities List, all of the real property used by the Company is subject to
one of the leases provided to Buyer. Each such lease is in full force and
effect and all rents and additional rents due to date on each such lease have
been paid; in each case, the lessee has been in peaceable possession since the
commencement of the original term of such lease and is not in material default
thereunder and no waiver, indulgence, or postponement of the lessee's
obligations thereunder has been granted by the lessor; and, to the best
knowledge of the Stockholders, there exists no event of default or event,
occurrence, condition, or act that, with the giving of notice, the lapse of
time, or both, would become a default under such lease. Company has not
violated any of the terms or conditions under any such lease in any material
respect, and all of the material covenants to be performed by any other party
under any such lease have been fully performed. All of the buildings and
properties under lease as well as the tenant improvements and fixtures included
among the Assets are in good operating condition and repair, ordinary wear and
tear excepted. No condemnation or taking by public authority of any of the
real property leased by Company is pending and Company has not been notified of
any contemplated condemnation or taking by public authority.

5.12.2 Other Leases and Agreements.

Other than Contracts, all of the personal property
leases, equipment maintenance contracts and service contracts of the Company
included among the Assets and set forth on the applicable schedules are in full
force and effect, binding on the parties thereto, and there are no material
defaults by the Company or, to Stockholders' knowledge, by any party thereto,
and no event has occurred (or failed to occur) that, with the passing of time
or the giving of notice or both would constitute a material default, and the
property subject to such leases is in good operating condition and repair,
normal wear and tear excepted.

5.13 Title.

The Company has good and marketable title to all tangible and
intangible property included among the Assets, free and clear of all security
interests, liens, claims, or encumbrances of any nature or kind whatsoever,
except for the Assumed Liabilities disclosed to Buyer. All Assets located on
the premises of Subscribers of the Company may, at the option of the Company,
be removed from or abandoned on such premises upon the termination of service
to such customer.

5.14 No UL Deficiencies.

The Company's Alarm Accounts have been monitored at Alarm
Monitoring Services, Inc.'s central station located at 1249 N.E. 145th Street,
Seattle, Washington, 98155, which has been approved and listed by Underwriters'
Laboratory ("UL") and is not subject to any deficiencies with respect thereto,
including but not limited to any deficiencies in any verbal or written report
received by Alarm Monitoring Services, Inc. in connection with any inspection
of such central station facility.

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<PAGE> 20
All required fire inspections with respect to each fire alarm system installed
at the premises of Company's Subscribers have been performed as required in
accordance with the obligations and commitments of the Company to UL and/or to
any applicable insurance rating organization. The Company has not issued any
UL certificates for alarm systems installed at the premises of the Company's
Subscribers.

5.15 Intangibles.

Included in Schedule 5 is a list of the Intangibles presently
owned by, licensed to or in any manner utilized in the Company's business. As
used herein, the term "Intangibles" means fictitious business names,
trademarks, service marks, trade names, patents, copyrights, registrations,
software licenses or applications with respect thereto and licenses or rights
under the same. Except in the ordinary course of business, the Company has not
granted any license or other permission to anyone else with respect to any
Intangible. No claim has been asserted against the Company alleging
infringement of any Intangible, nor, to Stockholders' knowledge, does there
exist any basis on which such a claim for infringement could reasonably be
based.

5.16 Employees.

Except as set forth in Schedule 5 hereto, (i) the Company does
not have any obligation contingent or otherwise, under, nor any commitment or
agreement to enter into and no officer, director or employee is covered by any
employment agreement; (ii) the Company is not a party or otherwise subject to
any collective bargaining or other agreement governing the wages, hours and
terms of employment of the Company's employees, is not subject to any actual or
threatened with any labor dispute or labor trouble involving employees of the
Company, and is not subject to any actual or threatened demand by its employees
for a collective bargaining agreement or recognition by any labor organization,
labor grievance proceeding, controversy with any labor or employee
organization, or claim or proceeding with any employee or union under any labor
law, including but not limited to equal opportunity law or occupational safety
and health law; (iii) the Company does not have any employment contract or
arrangement (including any union agreement) providing for future compensation,
written or oral, with any officer, consultant, director or employee which is
not terminable by Company on an "at will" basis without penalty or obligation
to make payments related to such termination; and (iv) the Company is not a
party to any plan, contract or arrangement with any officer, consultant,
director or employee, written or oral, providing for bonuses, pensions,
deferred compensation, severance pay or benefits, retirement payments, profit
sharing, or the like to be paid after the Closing Date. All employees of the
Company have been terminated effective as of September 30, 1996, and all
amounts due and owing to the employees through and including September 30,
1996, have been paid in full, including without limitation, all wages,
salaries, payroll taxes, bonuses, severance and employer contributions to any
pension or retirement plan. Stockholders have provided Buyer with a complete
and accurate copy of all of the Company's employee manuals, benefits and
policies.

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<PAGE> 21
5.17 Benefit Plans.

5.17.1 Employee Benefit Plans.

Schedule 5 identifies each "employee benefit plan,"
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and each employment agreement, compensation
agreement, bonus, commission or similar arrangement, and fringe benefit
arrangement which is maintained, administered or contributed to by Company or
any of its affiliates (as defined below) and covers any employee or former
employee of Company or any affiliate or under which Company or any affiliate
has any liability. Copies (or, if not in writing, detailed summaries) of such
plans (and, if applicable, related trust agreements) and all amendments thereto
and written interpretations thereof have been furnished to Buyer together with
(to the extent existing) (a) the most recent annual report prepared in
connection with any such plan and (b) the most recent actuarial valuation
report prepared in connection with any such plan. Such plans are referred to
collectively herein as the "Employee Plans." For purposes of this Section 5.17
only, an "affiliate" of any person or entity means any other person or entity,
which, together with such person or entity, would be treated as a single
employer under Section 414 of the Internal Revenue Code (the "Code") or Title
IV of ERISA. The only Employee Plans which individually or collectively would
constitute an "employee pension benefit plan" as defined in Section 3(2) of
ERISA are identified as such in Exhibit 2.10(a).

5.17.2 Multiemployer Plans.

No Employee Plan constitutes a "multiemployer plan"
as defined in Section 3(37) of ERISA (a "Multiemployer Plan"), no Employee Plan
is maintained in connection with any trust described in Section 501(c)(9) of
the Code and no Employee Plan is subject to Title IV of ERISA or Section 412 of
the Code. If Company or any of its affiliates ever maintained or was obligated
to contribute to a Multiemployer Plan or a plan subject to Title IV of ERISA or
Section 412 of the Code, any withdrawal or other liability under Title IV of
ERISA with respect to such plan has been fully satisfied. Nothing done or
omitted to be done and no transaction or holding of any asset under or in
connection with any Employee Plan has or will make Company or any officer or
director thereof, subject to any liability under Title I of ERISA or liable for
any tax pursuant to Section 4975 of the Code.

5.17.3 Qualification of Employee Plan.

Each Employee Plan which is intended to be qualified
under Section 401(a) of the Code is so qualified and has been so qualified
during the period from its adoption to date, and each trust forming a part
thereof is exempt from tax pursuant to Section 501(a) of the Code. Company has
furnished to Buyer copies of the most recent Internal Revenue Service
determination letters, if any, with respect to each such Employee Plan. Each
Employee Plan has been maintained

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<PAGE> 22
in substantial compliance with its terms and with the requirements prescribed
by any and all statutes, orders, rules and regulations, including but not
limited to ERISA and the Code, which are applicable to such Employee Plan.

5.17.4 Effect of this Agreement.

There is no contract, agreement, plan or arrangement
covering any employee or former employee of Company or any affiliate that
would, as a result of the consummation of the transactions contemplated by this
Agreement, (A) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due
to any director or employee of Company from the Company, under any Employee
Plan or otherwise, (B) materially increase any benefits otherwise payable under
any Employee Plan, (C) result in the acceleration of the time of payment or
vesting of any such benefits, or (D) otherwise obligate Company or any
affiliate to pay any additional compensation, including severance pay, that
would not be deductible pursuant to the terms of Sections 162(a)(1) or 280G of
the Code.

5.17.5 Post Retirement Benefits.

Neither Company nor any of its affiliates maintain or
administer any "defined benefit plans" for the benefit of their employees.
Neither Company nor its affiliates have any projected liability in respect of
post retirement health, life and medical benefits for retired employees of
Company or its affiliates, other than any liability to provide benefits under
Title I, Part 6 of ERISA, if any. Other than provisions of applicable law, to
the best knowledge of Stockholders, no condition exists that would prevent
Company from amending or terminating any applicable Employee Plan.

5.17.6 Plan Maintenance Expenses.

Other than any increase in premiums imposed by the
insurer under an employee welfare benefit plan (as defined in ERISA Section
3(1)), there has been no amendment to, written interpretation or announcement
(whether or not written) by Company or any of its affiliates relating to, or
change in employee participation or coverage under, any Employee Plan which
would materially increase the expense of maintaining such Employee Plan above
the level of the expense incurred in respect thereof for the most recent fiscal
year.

5.18 Form Contracts.

Included in Schedule 5 is a true and correct copy of each type
of form contract the Company has in effect with its Subscribers for alarm
leases, alarm monitoring, and other alarm services (the "Contracts"). Company
has not modified, except in a writing disclosed to Buyer, any of the Contracts
and has not undertaken any obligations or made any warranties or guarantees to
any

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<PAGE> 23
Subscribers other than those set forth in the Contracts. The Company has not
entered into any other type of service or lease contract with its Subscribers
nor is the Company rendering services to any of its Subscribers other than
pursuant to a Contract. Each Contract which the Company has with its current
Subscribers is fully executed, valid, in full force and effect, and enforceable
in accordance with its terms. Company is not in default or material violation
of any Contracts with its current Subscribers. On the Closing Date, the
Company shall have possession of all original monitoring and lease contracts
with Subscribers and such other documents and information which Buyer will need
and may reasonably require to perform monitoring, repair, servicing and other
alarm services requested by Subscribers or required to be provided pursuant to
the Contracts.

5.19 Employee Entitlements.

Stockholders have provided Buyer with a copy of the Company's
latest Payroll Register, the employee's name, whether such employee holds any
state-issued licenses in connection with his/her employment, hire-in date,
position, current salary and accrued vacation entitlements. Except as set
forth in the employee information provided to Buyer, no bonuses, severance,
medical expense reimbursement, additional compensation (other than salary or
wage increases in the ordinary course of business) or other like benefits were
paid or are payable to any employees during the period from January 1, 1996 to
the Closing Date, or are payable to any such employees in respect of any other
periods ending on, prior or subsequent to the Closing Date. The Company has,
with respect to the hiring of any employee, performed such actions including
investigations of such employee an may be required by applicable federal, state
or local laws, ordinances or regulations.

5.20 Increase in Fees; Capital Expenditures.

Since January 1, 1996, the Company has not increased recurring
monitoring charges or service charges payable by the Company's retail
Subscribers, other than for additions or changes in services or protection, nor
since August 1, 1996, has the Company made any capital expenditures (excluding
capitalized labor and equipment costs for alarm system installation) which in
the aggregate exceed $10,000.

5.21 No Defaults.

The Company is not in default, or alleged to be in default
under any material agreement, license or obligation relating to the Assets
and/or Assumed Liabilities. Except for delinquent payments by some of its
Subscribers, no other party to any such agreement, license, or obligation is in
default thereunder and there exists no condition or event which, after notice
or lapse of time or both, would constitute a default by any party to any such
agreement, license or obligation.

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<PAGE> 24
5.22 License and Permits.

The Company and its employees have all material governmental
licenses and permits (federal, state and local) necessary for the conduct of
the business as now carried on by the Company, and such licenses are in full
force and effect. Copies of all of Company's licenses are included in Schedule
5. No violations are or have been recorded and Stockholders are not aware of
any unrecorded violations in respect of any such licenses or permits of the
Company and no proceedings are pending or to Stockholders' knowledge threatened
concerning the revocation or limitation of any such license or permit of the
Company.

5.23 Environmental Compliance.

Company has never received any written notice, demand,
citation, summons, complaint or order or any written notice of any penalty,
lien or assessment, and to the best of Stockholders' knowledge, no
investigation or review is pending by any governmental entity, with respect to
any (i) alleged material violation by Company of any Environmental Law; or (ii)
alleged material failure by Company to have any environmental permit,
certificate, license, approval, registration or authorization required in
connection with the conduct of their business. To the best of Stockholders'
knowledge, Company has no Environmental Liabilities and the Company has never
had a material release of Hazardous Substances into the environment in
violation of any Environmental Law or environmental permit. Company has
delivered to Buyer copies of all environmental audits and other similar reports
which have been prepared by or for Company with respect to its owned or leased
real property. The Company does not own, lease or otherwise have any
obligations with respect to or responsibility for any underground fuel storage
tanks or facilities and has not and does not transport or store Hazardous
Substances, except in quantities and uses that are normal and customary in the
operation of a security alarm business.

5.24 Compliance With Laws.

The Company has complied with all material requirements of
laws, rules, regulations and orders applicable to the operation of the business
conducted by the Company. The Company has not received notice of any action
nor taken any action or failed to take any action which action or failure will
or would, in any way, preclude or prevent Buyer and the Company from using the
Assets after the Closing in the same manner as theretofore used by the Company.
To Stockholders' knowledge, none of the real property leased by the Company, or
the occupation thereof, is in violation of any material requirement of law,
building code, zoning or other authority, code or regulation applicable thereto
and no notice from any governmental body has been served upon Stockholders or
the Company claiming any violation of any such law, ordinance, codes or
regulation or requiring or calling attention to the need for any work, repair,
construction, alteration or installation or in connection with said properties
which has not been complied with or settled. None of the real property under
lease is subject to any pending zoning hearing or proceedings.

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5.25 Litigation.

There are no claims, litigation, proceedings or investigations
pending or to Stockholders' knowledge, threatened against the Company.
Included on Schedule 5 is a list of all the incidents in the past two years
where a customer or third party alleged damages in excess of $1,000, which is
alleged to result from a failure of an alarm system or Company's service, and
whether Company has reported such incident to its insurance carrier. No
insurance carrier, which has had any such incident reported to it, has made a
reservation of rights or denial of coverage with respect to such incident.

5.26 Brokers.

Stockholders have not employed any broker, finder or agent or
dealt with anyone purporting to act in such capacity or agreed to pay any
brokerage fee, finder's fee, or commission in connection with the transactions
contemplated by this Agreement.

5.27 Insurance.

The Company has in full force and effect the policies of
automobile liability insurance and commercial general liability insurance
("Liability Insurance"), a copy of which Liability Insurance policy in included
in Schedule 5. All of the Contracts are covered by the Company's Liability
Insurance coverage for negligence claims. The Company has had similar
Liability Insurance in full force and effect, without interruption, for the
life of the Company. The Company in not in default, and no event has occurred
(or failed to occur) that, with the passing of time or the giving of notice or
both would constitute a default by the Company under any such policy of
insurance, or would entitle the insurer under such insurance to deny coverage
of any claim against the Company.

5.28 Receivables.

The Accounts Receivable arose in the ordinary course of
business and are valid receivables reflecting sums due for the provision of
goods and services by Company. To the best knowledge of the Stockholders, the
Accounts Receivable are collectible in the book amounts thereof, less an amount
not in excess of the historical allowance for doubtful accounts provided for in
such Financial Statements, and are not subject to counterclaims, defenses or
rights of set off. The Accounts Receivable of Company arising after the date
of the aged Accounts Receivable list attached as Schedule 1.2 and prior to the
Closing Date arose or will arise in the ordinary course of business, are valid
receivables reflecting sums due for the provision of goods and services by the
Company, and have been collected or, to the best knowledge of the Stockholders,
are or will be collectible in the book amounts thereof, consistent with the
past practice of the Company, less the historical allowance for doubtful
accounts.

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5.29 Restrictive Agreements.

The Stockholders have provided Buyer with a complete set of
all contracts, agreements or understandings ("Restrictive Agreements") to which
(i) the Company is a party or (ii) the Company is in any way bound and which in
any way restrict or purport to restrict the Company's business or competition
whether with specified persons or specified areas or otherwise. None of the
Restrictive Agreements have been modified or changed and none of the rights of
the Company therein have been waived. The Stockholders are not aware of any
unauthorized use or breach of contract by any third parties in connection with
any customer lists or other proprietary information included in any account or
asset acquisition by the Company.

5.30 Work in Process.

All work in process in connection with the installation of
alarm monitoring equipment has been sold in accordance with the Company's
standard pricing and sales policies and practices.

5.31 Material Documents of the Company.

Included in Schedule 5 is a list identifying all material
contracts(1), licenses, authorizations and applications therefore relating to,
or affecting, and in which the Company is a party, which are not elsewhere
described herein (excluding any such items set forth in the Excluded Assets
List), including, without limiting the generality of the foregoing, any and all
agreements whereby the Company acquired the operations, stock, or substantially
all of the assets and/or accounts of any other alarm company. In addition,
Schedule 5 indicates, with respect to any agreements, licenses, authorizations,
applications or other similar documents included in the Assets or Assumed
Liabilities and listed on any other schedule to this Agreement, those which, in
the absence of specific waiver, consent, modification, renewal, replacement or
other action, may, upon or as a result of the consummation of this Agreement
and the purchase and sale of the SHI Stock pursuant hereto, terminate, expire,
be modified, be subject to termination by a party other than the Company or in
any respect not remain in full force and effect or be breached by the Company.
Stockholders are not aware of any facts that would lead a reasonable person to
believe that a third party intends to cancel its contract or contracts with the
Company or that a third party is entitled to terminate any such contract. The
Company does not have any warranty obligations under any of its contracts or
accounts, except customary warranties given in the ordinary course of business
and set forth in the Contracts.

__________________________________

(1) A material contract is any contract or commitment (i) not made in the
ordinary course of Company's business or (ii) which commits the Company to
spend more than $1,000.00 from the date hereof and which is not cancelable at
Company's discretion without penalty to Company.

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5.32 Monitoring.

All of the Alarm Accounts are monitored on telephone lines
which are owned and controlled by Alarm Monitoring Services, Inc. ("AMS").
Many of the Alarm Accounts are on telephone lines that have no other alarm
company accounts. Other telephone lines have a high percentage of Alarm
Accounts by number. A definitive plan for the transition of selected telephone
lines and the reprogramming of Alarm Accounts is contained in the AMS Agreement
attached as Schedule 8.4. None of the Alarm Accounts are monitored by long
range radio. All of the Alarm Account Subscribers who are monitored by derived
channels are billed directly by the utilities for telephone charges relating to
monitoring by derived channels, and therefore such charges are not included in
QRR.

5.33 Alarm Systems and Equipment.

All of the alarm systems in which the protective devices are
owned by the Company are in good working order and condition, ordinary wear and
tear, routine service needs and Subscriber misuse or non-use excepted, and such
alarm system equipment has been installed in accordance with good workmanlike
practices prevailing in the industry at the time of installation. All alarm
systems and equipment of the Company conform in all material respects to the
Contract pursuant to which it was installed and comply with all material
applicable laws, rules, regulations and codes at the time of its installation.
All of the machinery, equipment, and motor vehicles (whether owned or leased)
included among the Assets are in good operating condition and repair, normal
wear and tear excepted.

5.34 Location of Alarm Account Subscribers.

All of the Alarm Account Subscribers are located in
Washington, Oregon, Idaho, California, Arizona, New Mexico and Nevada ("Buyer's
Existing Market").

5.35 Oral Accounts.

All agreements, representations and warranties made by Company
to the Subscribers whose Alarm Accounts are not documented by an executed
contract are identical to and no greater in scope of duties, obligations or
liabilities than are contained in the Contracts.

5.36 Schedules Delivered at Execution.

All of the schedules described in this Agreement and prepared
by Stockholders which are being delivered to Buyer upon execution hereof (i)
are true, accurate and complete, as of the Closing Date and (ii) have been
prepared in conformity with the provisions of this Agreement.

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5.37 No Material Misstatements.

No representation or warranty by Stockholders contained in
this Agreement, or in any Exhibit or Schedule attached hereto, contains, or
will contain, any untrue statement of a material fact or omits, or will omit,
to state a material fact necessary to make the statements contained herein or
therein not misleading.

6. Representations, Warranties and Agreements of Buyer.

Except as set forth on Schedule 6 ("Buyer's Disclosure Schedule"),
Buyer agrees, represents and warrants as follows:

6.1 Corporate Status of Buyer.

Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Buyer is qualified to
conduct business in the States of Oregon and Washington as a foreign
corporation. Buyer has full corporate power and corporate authority to
purchase and acquire the SHI Stock as herein provided.

6.2 Authorization of Buyer.

This Agreement has been duly executed and delivered by Buyer
and constitutes a valid obligation legally binding on Buyer and is enforceable
against Buyer in accordance with its terms, except as enforceability may be
limited or affected by applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the rights of
creditors and except as enforceability may be limited by rules of law governing
specific performance, injunctive relief or other equitable remedies. No
registration, declaration or filing with any governmental or administrative
authority is required on the part of Buyer in connection with the execution,
delivery and performance of this Agreement.

6.3 Litigation.

There are no claims, litigation, proceedings or investigations
pending or, to the best knowledge of Buyer, threatened against Buyer which
would have a material adverse impact on Buyer's ability to perform all of its
duties and obligations under this Agreement.

6.4 Brokers.

Buyer has not employed any broker, finder or agent or dealt
with anyone purporting to act in such capacity or agreed to pay any brokerage
fee, finder's fee or commission in connection with the transactions
contemplated by this Agreement.

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<PAGE> 29
6.5 Investment Intent.

Buyer is acquiring the SHI Stock for its own account and not
with a view to any public resale or distribution. Buyer is an "accredited
investor" as such term is defined in Regulation D under the Securities Act of
1933, as amended ("Securities Act"). Buyer acknowledges that the SHI Stock has
not been registered under the Securities Act or registered or qualified under
the securities laws of any state and may not be offered, sold, pledged,
hypothecated or otherwise transferred unless so registered or qualified or
unless an exemption from the registration requirements under the Securities Act
and any applicable state securities laws is available.

7. Covenants of Stockholders.

7.1 Stub Tax Return Filing.

Stockholders, at their sole expense, agree to prepare and to
file within the applicable filing time limits all federal, state and local tax
returns of the Company for all periods prior to the Closing Date which are
required to be filed and shall provide Buyer with copies of all such returns
and related work papers.

7.2 Excluded Liabilities.

Stockholders agree to assume, discharge and hold Company and
Buyer harmless from any liability for the Excluded Liabilities.

8. Covenants of the Buyer.

8.1 Access to Books and Records.

For a period of three (3) years after the Closing Date, Buyer
agrees that Stockholders and their representatives shall have reasonable access
to all books and records of the Company to the extent that such access is
lawful and may reasonably be required by the Stockholders in connection with
matters relating to or affected by the operations of the Company prior to the
Closing Date, including without limitation tax matters and pending litigation.
Such access shall be afforded by Buyer during normal business hours.

8.2 Payment of Assumed Liabilities.

Buyer agrees to assume, discharge and hold Stockholders
harmless from any liability for the Assumed Liabilities.

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<PAGE> 30
8.3 Voice Telephone Lines.

In the event Buyer determines that the Company no longer needs
any of the voice Telephone Lines, which are not used for monitoring any of the
Alarm Accounts, then Buyer shall notify Stockholders in writing, and
Stockholders shall have fourteen (14) days from the date of such written notice
to exercise the option to take over ownership and control of the voice
Telephone Lines described in the notice. If Stockholders, or any of them,
notify Buyer of the exercise of the option, Company shall execute such
supersedure or letter of agency documents as may be required by the telephone
company to transfer such lines to the Stockholder or Stockholders who have
exercised the option, and such Stockholder or Stockholders shall assume
liability for all charges relating to such voice Telephone Lines from and after
the date of transfer of the voice Telephone Lines to the Stockholder or
Stockholders. If the Stockholders do not exercise the option to take over
possession and control of the voice Telephone Lines within 14 days after the
date of the notice, Company may abandon or otherwise transfer the Telephone
Lines to any party.

8.4 Post-Closing Monitoring, Service and Repair.

Alarm Monitoring Services, Inc. ("AMS") has been performing
the monitoring of the Alarm Accounts. AMS and Company will enter into an
agreement in the form attached hereto as Schedule 8.4 for AMS to continue to
monitor the Alarm Accounts after the Closing.

9. Indemnification By Stockholders.

9.1 Indemnification.

Notwithstanding any investigation by Buyer, Stockholders agree
to indemnify, hold harmless and defend Buyer, including Buyer's agents,
employees, officers, directors, and subsidiary and parent corporations
(collectively, the "Buyer Parties") from and against, and to reimburse the
Buyer Parties with respect to, any and all losses, damages, liabilities, costs
and expenses, including interest, penalties and reasonable attorneys' fees,
incurred by the Buyer Parties, or any of them, by reason of or arising out of
or in connection with: (i) any breach or inaccuracy of any representation or
warranty of Stockholders made in this Agreement or the schedules or exhibits
hereto; (ii) the nonfulfillment or inadequate performance of any covenant or
agreement on the part of Stockholders under this Agreement; (iii) any
liabilities of the Company to third parties of any nature arising out of any
act performed or state of facts suffered to exist by the Company on or prior to
the Closing Date, other than (a) Assumed Liabilities in the amount set forth in
subparagraph (a) and (b) of Schedule 1.4, and (b) performance of the duties and
obligations under the written contracts with Subscribers included in the
Assumed Liabilities after the Closing Date; (iv) any claim or liability arising
out of or related to the litigation and claims, or threats thereof, described
in Schedule 9.1(iv) ("Existing Litigation Claims"); and (v) the failure by the
Company or its predecessors to comply, prior to the Closing Date, with any
"three (3) day right of rescission" law or similar right of

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<PAGE> 31
rescission statute covering any of the Alarm Accounts. This indemnification
extends to any losses suffered or costs incurred by the Buyer Parties arising
out of or relating to claims pursuant to this Section 9.1, including, without
limitation, reasonable attorneys' fees, whether or not a lawsuit is commenced
by any third party. Any claim for indemnification by any of the Buyer Parties
pursuant to this Section 9.1 shall hereinafter be referred to as a "Buyer's
Claim."

9.2 Survivability.

In order for any Buyer Parties to be entitled to
indemnification for a Buyer's Claim as provided for in Section 9.1, a notice of
Buyer's Claim must be submitted to Stockholders within the following applicable
time limitations:

(a) Except as provided in Section 9.2(b) or in cases of
fraud or intentional misrepresentation, a Buyer's
Claim pursuant to Section 9.1(i) must be submitted on
or before December 31, 1997; and

(b) A Buyer's Claim pursuant to Section 9.1(i) for a
breach of Sections 5.5, 5.11 and 5.13 must be
submitted before the expiration of the applicable
statute of limitations relative to such Buyer's
Claim; and

(c) A Buyer's Claim pursuant to Section 9.1(ii) for a
breach of Section 17 must be submitted before the
expiration of the applicable statute of limitations
relative to such Buyer's Claim; and

(d) All other Buyer's Claims must be submitted on or
before December 31, 1999.

9.3 Buyer's Claim Basket and Liability Limit.

With the exception of Buyer's Claims under Section 9.1(iv),
Stockholders' obligations with respect to indemnity pursuant to this section
shall be limited to the extent that the aggregate of such Buyer's Claims must
first exceed $50,000 ("Buyer's Claim Basket"). In no event shall the total
liability of the Stockholders for all Buyer's Claims exceed the Purchase Price
("Liability Limit"); provided however, any Buyer's Claim resulting from
Stockholders' (or their designee's) failure to pay or otherwise satisfy any of
the Excluded Liabilities shall not be included in the Buyer's Claim Basket or
Liability Limit described in this Section 9.3.

9.4 Notice; Tendering Defense to Stockholders.

Stockholders' obligation to indemnify and reimburse Buyer
hereunder are subject to prior written thirty (30) day notice by Buyer of a
Buyer's Claim, unless the Buyer's Claim involves litigation, in which case
Buyer shall provide Stockholders with notice of such litigation within

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<PAGE> 32
twenty (20) days after receipt of such complaint by Buyer; and provided,
however, that Stockholders shall have the right to defend any Buyer's Claim
made by a third party, and Stockholders shall have the right to control the
defense, settlement or compromise of such Buyer's Claim and Buyer shall have
the right to be kept currently informed and to reasonably participate in all
aspects of such litigation to the extent deemed necessary to protect Buyer's
interest, unless the amount of damages demanded or alleged or prayed for in the
complaint (or if no damages are demanded, alleged or prayed for in the
complaint, the damages reasonably likely to result from such a Buyer's Claim)
exceeds the Stockholders' Liability Limit, as such term is defined in Section
9.3, in which case the party with the greatest economic risk shall have the
right to such control, subject to the other party's right of information and
participation. Notwithstanding anything to the contrary contained in this
Agreement, Buyer shall control the defense, settlement or compromise of any
Buyer's Claim where the damages demanded or alleged or prayed for in the
complaint (or if no damages are demanded or alleged or prayed for in the
complaint, the damages reasonably likely to result from such a Buyer's Claim)
do not exceed the Buyer's Claim Basket, and after the Buyer's Claim Basket has
been exceeded, Buyer shall control the defense, settlement or compromise of any
Buyer's Claim where the damages demanded or alleged or prayed for in the
complaint do not exceed the sum of $2,500, and Stockholders shall have no right
to be kept informed or to participate in such litigation.

In addition, Stockholders will indemnify and hold harmless
Buyer from, for and against any costs and expenses (including attorneys' fees
at trial and in any appeal) which it may suffer or incur in connection with
enforcement of the indemnification obligation of the Stockholders hereunder.

9.5 Right of Setoff.

In addition to the rights of Buyer under Sections 9.1 through
9.4, Stockholders agree that Buyer shall have the right at any time following
the Closing Date to setoff against any amounts payable to Stockholders under
this Agreement an amount equal to any and all losses, damages, liabilities,
costs and expenses incurred by Buyer, including without limitation, reasonable
attorney fees, for which Buyer has a right to indemnification under Sections
9.1 through 9.4.

10. Indemnification by Buyer.

10.1 Indemnification.

Notwithstanding any investigation by Stockholders, Buyer
agrees to indemnify, hold harmless and defend Stockholders, including
Stockholders' agents (collectively, the "Stockholder Parties") from and
against, and to reimburse the Stockholder Parties with respect to, any and all
losses, damages, liabilities, costs and expenses, including interest, penalties
and reasonable attorneys' fees, incurred by the Stockholder Parties, or any of
them, by reason of or arising out of or in connection with: (i) any breach or
inaccuracy of any representation or warranty of Buyer made in

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<PAGE> 33
this Agreement or the schedules or exhibits hereto, (ii) the nonfulfillment or
inadequate performance of any covenant or agreement on the part of Buyer under
this Agreement, or (iii) any liabilities of the Company to third parties of any
nature arising out of any act performed or state of facts suffered to exist by
the Company on or after the Closing Date. This indemnification extends to any
losses suffered or costs incurred by the Stockholder Parties arising out of or
relating to claims pursuant to this Section 10.1, including, without
limitation, reasonable attorneys' fees, whether or not a lawsuit is commenced
by any third party. Any claim for indemnification by any of the Stockholder
Parties pursuant to this Section 10.1 shall hereinafter be referred to as a
"Stockholders' Claim."

10.2 Survivability.

In order for any Stockholder Parties to be entitled to
indemnification for a Stockholders' Claim as provided for in Section 10.1, a
notice of Stockholders' Claim must be submitted to Buyer within the following
applicable time limitations:

(a) Except in cases of fraud or intentional
misrepresentation, a Stockholders' Claim pursuant to
Section 10.1(i) must be submitted on or before
December 31, 1997; and

(b) All other Stockholders' Claims must be submitted on
or before December 31, 1999.

10.3 Stockholders' Claim Basket and Liability Limit.

Buyer's obligations with respect to indemnity pursuant to this
section shall be limited to the extent that the aggregate of such Stockholders'
Claims must first exceed $50,000 ("Stockholders' Claim Basket"). In no event
shall the total liability of the Buyer for all Stockholders' Claims exceed the
Purchase Price ("Buyer's Liability Limit"); provided however, any Stockholders'
Claim resulting from Buyer's (or its designee's) failure to pay or otherwise
satisfy any of the Assumed Liabilities up to the amounts set forth in Schedule
1.4 shall not be included in the Stockholders' Claim Basket or Buyer's
Liability Limit described in this Section 10.3.

10.4 Notice; Tendering Defense to Buyer.

Buyer's obligation to indemnify and reimburse Stockholders
hereunder is subject to prior written thirty (30) day notice by Stockholders of
a Stockholders' Claim, unless the Stockholders' Claim involves litigation, in
which case Stockholders shall provide Buyer with notice of such litigation
within twenty (20) days after receipt of such complaint by Stockholders;
provided, however, that Buyer shall have the right to defend any Stockholders'
Claim made by a third party, and Buyer shall have the right to control the
defense, settlement or compromise of such Stockholders' Claim and Stockholders
shall have the right to be kept currently informed and to

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<PAGE> 34
reasonably participate in all aspects of such litigation to the extent deemed
necessary to protect Stockholders' interests, unless the amount of damages
demanded or alleged or prayed for in the complaint (or if no damages are
demanded, alleged or prayed for in the complaint, the damages reasonably likely
to result from such a Stockholders' Claim) exceeds the Buyer's Liability Limit,
in which case the party with the greatest economic risk shall have the right to
such control, subject to the other party's right of information and
participation. Provided, however, that Stockholders shall control the defense,
settlement or compromise of any Stockholders' Claim where the damages demanded
or alleged or prayed for in the complaint (or if no damages are demanded or
alleged or prayed for in the complaint, the damages reasonably likely to result
from such a Stockholders' Claim) do not exceed the Stockholders' Claim Basket,
and after the Stockholders' Claim Basket has been exceeded, Stockholders shall
control the defense, settlement or compromise of any Stockholders' Claim where
the damages alleged or prayed for in the complaint do not exceed the sum of
$2,500, and Buyer shall have no right to be kept informed or to participate in
such litigation.

In addition, Buyer will indemnify and hold harmless
Stockholders from, for and against any costs and expenses (including attorneys'
fees at trial and in any appeal) which they may suffer or incur in connection
with enforcement of the indemnification obligation of the Buyer hereunder.

11. Conditions Precedent to Obligations of Buyer.

All obligations of Buyer at the Closing are subject, at Buyer's
option, to the fulfillment prior to or at the Closing by the Stockholders of
each of the following:

11.1 Agreement and Schedules.

The execution and delivery by Stockholders of all Schedules
and Exhibits required by this Agreement to be delivered on the Closing Date.

11.2 Corporate Actions of the Company.

The receipt by Buyer of the resignations of all of the
directors and officers of the Company as and to the extent requested by Buyer.

11.3 Authorization of Company.

The Board of Directors and Stockholders of the Company shall,
to the extent required by applicable law, have approved this Agreement and the
Plan of Share Exchange. Certified copies of the Company's Board of Directors
minutes authorizing the transactions contemplated by this Agreement shall be
delivered to Buyer.

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<PAGE> 35
11.4 Good Standing Certificate.

Receipt by Buyer of a certificate from the Washington
Secretary of State and in all states where Company conducts business as a
foreign corporation, dated as close to the Closing Date as possible, stating
that the Company is an existing Washington corporation or a foreign corporation
in good standing.

11.5 No Pending Litigation.

There shall not be pending or threatened any claim,
proceeding, investigation or inquiry, by any person, governmental body or
authority, seeking to prevent or change the terms of, or obtain damages in
connection with, this Agreement or the transaction contemplated hereby or which
questions the validity or legality of the consummation of the transaction
contemplated hereby. No action or proceeding relating to any item that is not
disclosed in Schedule 5 shall have been instituted or threatened prior to the
Closing Date that, if concluded adversely to the Company, would be materially
adverse to Buyer's ownership of the Stock and operation of the Assets and
business of Company.

11.6 Company Stock Certificates.

Receipt by Buyer of the SHI Stock certificates and executed
transfer documents.

11.7 Agreement With AMS.

The execution and delivery by AMS of a satisfactory agreement
with the Company to provide monitoring services for a period of two years after
the Closing Date.

11.8 Agreement With Escrow Agent.

The execution and delivery by the Escrow Agent and
Stockholders of a satisfactory Escrow Agreement relating to the shares of Pro
One Stock which make up the Deferred Payment.

11.9 Registration Rights Agreement.

Stockholders shall have executed and delivered to Buyer the
Registration Rights Agreement and Affidavit and Agreement of Prospective
Investor in the form attached hereto as Schedule 11.9.

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<PAGE> 36
11.10 Lease Consents.

Receipt by Buyer of all consents, if applicable, from all
lessors as a result of the change in control of the Company.

11.11 Opinion Letter of Stockholders' Legal Counsel.

Receipt by Buyer of the opinion of Stockholders' legal counsel
in a form acceptable to Buyer.

11.12 Miscellaneous.

Receipt by Buyer of all consents and such additional
instruments and documents as may reasonably be required by this Agreement or to
consummate the transactions contemplated herein.

12. Conditions Precedent to Obligations of Stockholders.

All obligations of Stockholders at the Closing are subject, at the
option of Stockholders, to the fulfillment prior to or at the Closing by Buyer
of each of the following:

12.1 Pro One Stock Certificates.

Receipt by Stockholders of the Pro One Stock certificates in
the amount of the Closing Payment and delivery to the Escrow Agent of the Pro
One Stock certificates which constitute the Deferred Payment.

12.2 Authorization of Buyer.

The Board of Directors of Buyer shall have approved, to the
extent required under applicable law or Buyer's Certificate of Incorporation
and Bylaws, (i) the Agreement and the execution and delivery hereof by the
Buyer, and (ii) the performance by Buyer of all of its obligations pursuant to
this Agreement. Certified copies of Buyer's Board of Directors minutes
authorizing the transactions contemplated by this Agreement shall be delivered
to Stockholders.

12.3 Agreement With AMS.

The execution and delivery by AMS of a satisfactory agreement
with the Company to provide monitoring services for a period of two years after
the Closing Date.

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<PAGE> 37
12.4 Agreement With Escrow Agent.

The execution and delivery by the Escrow Agent and Buyer of a
satisfactory Escrow Agreement relating to the shares of Pro One Stock which
make up the Deferred Payment.

12.5 Registration Rights Agreement.

Parent shall have executed and delivered to Buyer the
Registration Rights Agreement in the form attached hereto as Schedule 11.9.

12.6 Opinion Letter of Buyer's Legal Counsel.

Receipt by Stockholders of the opinion of Buyer's legal
counsel in a form acceptable to Stockholders.

13. Expenses.

Buyer, the Company, and Stockholders shall each pay all of their own
respective expenses incurred by or on behalf of each of them in connection with
this Agreement and the transactions contemplated hereunder, including, but not
limited to, all due diligence, legal and accounting expenses.

14. Nature of Statements and Survival of Representations,
Warranties And Agreements.

All statements of fact and only those statements of facts contained in
any written statement, certificate, exhibit, schedule or other document
delivered by or on behalf of the parties pursuant hereto or in connection with
the consummation of the transactions contemplated hereby are deemed
representations and warranties made hereunder. All covenants, representations,
warranties and agreements made by the parties hereunder shall survive the
Closing Date, the delivery of the SHI Stock and Pro One Stock, and the
dissolution and liquidation of any party hereto and remain effective regardless
of any investigation at any time (whether before or after the date of this
Agreement) made by or on behalf of any party or of any information any party
may obtain or have (whether before or after the date of this Agreement) in
respect thereof and regardless of any non-exercise by a party of any rights
hereunder.

15. Arbitration.

All disputes between Buyer and Stockholders in connection with this
Agreement, including without limitation, those involving the Purchase Price,
Final Purchase Price Schedule, and QRR Guaranty, shall be resolved by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect; provided, however, this agreement to
arbitrate

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<PAGE> 38
shall not apply to any disputes if either party is a debtor in a proceeding
under the Federal bankruptcy laws or to any claims and disputes arising out of
or relating to the non-competition and nonsolicitation agreement of
Stockholders. Buyer and Stockholders agree that the location of all
arbitration hearings or other court appearances to this Agreement shall be in
Multnomah County, Oregon, and Buyer and Stockholders submit to the jurisdiction
of the Oregon courts for entry of judgment of the arbitration award.

16. Transition Support.

After the Closing Date and continuing for a period of no less than
ninety (90) days and no more than one hundred twenty (120) days, Stockholders,
at no cost to Buyer, shall make the former "key" executives of Company listed
in Schedule 16 (who terminated their employment with Company as of or prior to
the Closing Date) reasonably available to respond to Buyer's questions as
necessary to assist Buyer during such period with the transition of Assets,
business and operations to Buyer as a result of the sale contemplated hereby.
There will be no charge to Buyer for such transition assistance, other than
reimbursement for reasonable out-of-pocket expenses directly incurred in
connection with any travel or other expenses undertaken at the written request
of Buyer. The assumed business names listed on Schedule 1.3(b) have been
transferred by Company to Stockholders or any of their affiliated companies,
Company shall be allowed to continue to use such assumed business names in
connection with servicing the Alarm Accounts and in connection with the
transition of ownership of such Alarm Accounts for a period of one (1) year
from the date of this Agreement. Company shall not use such assumed business
names in connection with soliciting any new customers.

17. Nonsolicitation and Confidentiality.

17.1 Nonsolicitation Covenants.

For this Section 17.1 only, the term "Alarm Accounts" shall
mean only the Qualified Accounts. Stockholders agree that for ten (10) years
following the date of this Agreement, Stockholders will not, individually or as
a director, officer, partner, limited partner, member, employee, agent,
representative, stockholder, creditor or consultant or in any other capacity
with any business, in any manner, directly or indirectly, in or with regard to
any Alarm Accounts in the States of Oregon, Idaho and Washington, solicit,
divert or knowingly accept orders for sale or leasing, installation,

Page 38 - AGREEMENT FOR STOCK PURCHASE
<PAGE> 39
maintenance or monitoring of alarm systems or for providing armed response
services from any Subscribers whose Alarm Accounts are owned by the Company as
of the Closing Date. Stockholders also agree for that ten (10) years following
the date of this Agreement, if any of the Stockholders individually or as a
director, officer, partner, limited partner, member, employee, agent,
representative, stockholder, creditor or consultant or in any other capacity
with any business, in any manner, directly or indirectly, in or with regard to
any Alarm Accounts in the States of Oregon, Idaho and Washington, solicit,
divert or unknowingly accept orders for sale or leasing, installation,
maintenance or monitoring of alarm systems or for providing armed response
services from any Subscribers whose Alarm Accounts are owned by the Company as
of the Closing Date, that Stockholders shall be responsible for notifying Buyer
promptly (but in no event more than thirty (30) days after discovery of such
Subscriber's alarm account) and shall, upon request of Buyer, transfer to Buyer
such Subscriber's alarm account, at no cost to Buyer, plus all amounts prepaid
by such Subscriber for monitoring and other services to be performed by Buyer
after the date of such transfer. Before accepting new customers at Hugh Edward
or any other alarm companies in which either Herbert H. Warrick, Jr. or Russell
E. VanDevanter has any ownership interest or management responsibility, they
shall determine if the new customer's address is the same address as any of the
Subscribers, and shall not, within ten (10) years after the date of this
Agreement, accept such new customer if the customers' Alarm Account was owned
by Company. The parties agree that general advertising which is not directed
to or targeted to the Subscribers shall not violate the nonsolicitation
restrictions set forth herein, so long as all other restrictions against
diverting or knowingly accepting orders for sale or leasing, installation,
maintenance or monitoring of alarm systems or for providing armed response
services are observed. Stockholders also agree that, for five (5) years
following the date of this Agreement, Stockholders will not, individually or as
a director, officer, partner, limited partner, member, employee, agent,
representative, stockholder, creditor or consultant or in any other capacity
with any business, recruit, offer to employ, or otherwise solicit the
employment of any person who was at any time within three (3) months prior to
such action an employee of Buyer or to whom the Company has extended an offer
to continue their employment after the Closing Date; provided however, that a
general classified advertisement which is not directed to Buyer's or Company's
employees shall not violate the restrictions set forth herein so long as no
offer of employment is made to any employee of Buyer or Company or to a person
who was an employee of Buyer or Company within the previous three (3) months.
Buyer recognizes that Stockholders own and operate a subcontract central
station (AMS) and this Agreement places no restrictions on alarm company
customers of AMS where Stockholders have no other financial interest in the
alarm company.

17.2 Nondisclosure of Confidential Information.

Stockholders agree to maintain as secret and confidential all
"Confidential Information," as defined herein, and agree not to use, disclose,
transfer, sell, or make such information available to any successors or third
parties, except as authorized in advance and in writing by Buyer or in the
following circumstances: (a) as required in order to comply with any
subpoena, court order or applicable law, provided that the disclosing party
shall use its best efforts to give Buyer prior written notice of such
disclosure; or (b) if such information becomes publicly available not due to
the fault of Stockholders. The term "Confidential Information" means any trade
secrets, proprietary or other information which is either reasonably designated
in writing to Stockholders as confidential by Buyer or reasonably known by
Stockholders to be confidential relating to the Alarm Accounts or Assets,
including without limitation, any of the following information, which is hereby
designated as confidential: any customer or Subscriber lists; any lists,

Page 39 - AGREEMENT FOR STOCK PURCHASE
<PAGE> 40
notes, or compilations which contain the names, addresses, telephone numbers,
or any contract information for or relating to the Subscribers; monitoring
information and Subscriber codes and passwords; and copies of contracts,
agreements, and related documents between Company and the Subscribers under the
Alarm Accounts.

17.3 Enforcement.

Stockholders acknowledge and agree that the time, scope,
geographic area and other provisions of Sections 17.1 and 17.2 have been
specifically negotiated by sophisticated parties and specifically hereby agree
that such time, scope, geographic area and other provisions are reasonable
under the circumstances. Stockholders further agree that if, at any time,
despite the express agreement of the parties hereto, a court of competent
jurisdiction holds that any portion of Sections 17.1 and 17.2 are unenforceable
for any reason, the maximum restrictions of time, scope or geographic area
reasonable under the circumstances, as determined by such court, will be
substituted for any such restrictions held unenforceable. Stockholders agree
that Buyer will suffer irreparable harm if any of the Stockholders fail to
comply with the provisions of Section 17 this Agreement and that Buyer will be
entitled to injunctive relief to enforce the terms of this Agreement in
addition to any other remedies available to Buyer.

18. Miscellaneous.

18.1 Notices.

Any and all notices, demands or other communications required
or desired to be given hereunder by any party shall be in writing and shall be
validly given or made to another party if served either personally or if
deposited in the United States mail, certified or registered, postage prepaid,
return receipt requested. If such notice, demand or other communication is
served personally, or by facsimile (with verbal verification of complete
receipt), service shall be conclusively deemed made at the time of such
personal service or facsimile transmission. If such notice, demand or other
communication is given by mail, such notice shall be conclusively deemed given
seventy-two (72) hours after the deposit thereof in the United States mail
addressed to the party to whom such notice, demand or other communication is to
be given as hereinafter set forth:

If to Stockholders: Herbert H. Warrick, Jr.
(other than Maria Russell E. VanDevanter
M. VanDevanter) P. O. Box 65027
Seattle, Washington 98115
Facsimile: (206) 362-7650

Page 40 - AGREEMENT FOR STOCK PURCHASE
<PAGE> 41
With a copy to: Douglass A. Raff
Graham & James, LLP/Riddell Williams, P.S.
1001 Fourth Avenue Plaza, Suite 4500
Seattle, Washington 98154
Facsimile: (206) 389-1708

If to Maria M. VanDevanter: Maria M. VanDevanter
7537 Roosevelt Way NE
Seattle, Washington 98115

With a copy to: Larry W. Hopt
PO Box 19300
Seattle, Washington 98109
Facsimile: (206) 527-3735

If to Buyer: Protection One Alarm Monitoring, Inc.
3900 S.W. Murray Blvd.
Beaverton, Oregon 97005
Attention: John E. Mack, III
Facsimile: (503) 520-6099

With a copy to: Mark R. Wada
Farleigh, Wada & Witt, P.C.
121 S.W. Morrison Street, Suite 600
Portland, Oregon 97204
Facsimile: (503) 228-1741

18.2 Modifications or Amendments.

No amendment, change or modification of this document shall be
valid unless in writing and signed by all parties hereto.

Page 41 - AGREEMENT FOR STOCK PURCHASE
<PAGE> 42
18.3 Waiver.

No reliance upon or waiver of one or more provisions of this
Agreement shall constitute a waiver of any other provisions hereof. All
waivers must be in writing and signed by the party waiving compliance.

18.4 Knowledge of Parties.

Where any representation or warranty contained in this
Agreement is expressly qualified by a reference to knowledge, information
and/or belief of the party making such representation and warranty, such party
shall have made reasonable inquiry as to the matters that are the subject of
such representations and warranties.

18.5 Successors and Assigns.

All of the terms and provisions contained herein shall inure
to the benefit of and shall be binding upon the parties hereto and their
respective heirs, personal representatives, successors and assigns.

18.6 Separate Counterparts.

This document may be executed in one or more separate
counterparts, each of which, when so executed, shall be deemed to be an
original. Such counterparts shall, together, constitute and shall be one and
the same instrument.

18.7 Further Assurances.

Each of the parties hereto shall execute and deliver any and
all additional papers, documents, and other assurances, and shall do any and
all acts and things reasonably necessary in connection with the performance of
their obligations hereunder and to carry out the intent of the parties hereto.

18.8 Applicable Law and Severability.

This document shall, in all respects, be governed by and
construed in accordance with the laws of the State of Oregon. If any
provisions of this Agreement are found to be unenforceable or invalid, the
remaining provisions shall nevertheless be enforceable. If feasible, the term
or provision which is found to be unenforceable or invalid shall be deemed to
be modified or limited to the extent necessary to be valid and enforceable.

Page 42 - AGREEMENT FOR STOCK PURCHASE
<PAGE> 43
18.9 Attorneys' Fees and Costs.

In the event any action is instituted by a party hereto to
enforce any of the terms or provisions hereof, the prevailing party in such
action, as determined by the court, shall be entitled to such reasonable fees,
costs and expenses at trial, on appeal and in connection with any review.

18.10 Captions.

Any captions to the sections of this Agreement are solely for
the convenience of the parties and are not a part of this Agreement and shall
not be used for the determination of the validity of this Agreement or any
provision therefor.

18.11 Entire Agreement.

This document, together with any exhibits, schedules or
documents attached hereto, or delivered and initialed by the parties in
connection herewith, constitutes the entire understanding and agreement of the
parties with respect to the subject matter of this Agreement.

18.12 Confidentiality.

Each party shall hold in confidence the fact of the existence
of and all economic and other terms of this Agreement and the transactions
contemplated herein (collectively, "Confidential Terms"). The parties agree
that disclosure of any Confidential Terms shall be limited solely to management
of and advisors to Buyer and Stockholders on a "need to know" basis, and such
management and advisors shall be advised of and agree to be bound by the
provisions of this Section 18.12. In furtherance and not in limitation of the
foregoing, no statements shall be issued regarding this Agreement or the
economic or other terms of the transactions contemplated herein without the
prior written consent of Buyer and Stockholders. Notwithstanding anything to
the contrary set forth in this Agreement or any other documents executed by the
parties, Buyer is authorized to disclose the existence of and all economic and
other terms of this Agreement in connection with any state or federal
securities filings, offering circulars, registration statements, or loan
agreements of Buyer or its parent company, Protection One, Inc.

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

STOCKHOLDERS:

________________________________________
Herbert H. Warrick, Jr.

Page 43 - AGREEMENT FOR STOCK PURCHASE
<PAGE> 44
________________________________________
Ramona L. Warrick

________________________________________
Russell E. VanDevanter

________________________________________
Maria M. VanDevanter

BUYER: PROTECTION ONE ALARM MONITORING, INC.

By:_____________________________________
Its:____________________________________

Page 44 - AGREEMENT FOR STOCK PURCHASE

<PAGE> 1

Exhibit 4.3

REGISTRATION RIGHTS AGREEMENT

DATED: September 30, 1996

BETWEEN: Protection One, Inc.,
a Delaware corporation
3900 S.W. Murray Boulevard
Beaverton, Oregon 97005 ("POI")

AND: Sequence Systems, Inc.,
dba Alltec Security Systems,
an Oregon corporation
7515 N.E. Ambassador Place, Suite C
Portland, Oregon 97220 (the "Shareholder")

RECITALS:

A. Pursuant to that certain Agreement and Plan of
Reorganization (the "Plan") among Protection One Alarm Monitoring, Inc.
("Monitoring"), Shareholders, and Robert P. Thompson, George T. Nuttle and
Donald A. Buss dated concurrently herewith by the terms of which Shareholder
transfers substantially all of its assets to Monitoring solely in exchange for
an aggregate of one hundred ninety-two thousand four hundred eleven and 75/100
(192,411.75) shares (the "Registrable Shares") of the common stock, par value
$.01 per share (the "Common Stock") of POI and the assumption by Monitoring of
certain of the liabilities of Shareholder in a transaction intended to qualify
as a "reorganization" within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1993, as amended, it being contemplated by Shareholder
and Monitoring that Shareholder shall thereafter, as an integral part of such
transaction, distribute the Registrable Shares to the shareholders of
Shareholder in complete liquidation of Shareholder, POI has agreed to file with
the Securities and Exchange Commission, as soon as possible but in no event
later than ten (10) days after the date hereof, a registration statement on
Form S-3 (as from time to time amended, the "Registration Statement")
registering the offer and sale by Shareholder from time to time of the
Registrable Shares included therein (the "Registered Shares"); and

B. Section 3.1.2 of the Plan contemplates that the
Shareholder will enter into this Agreement to further define their respective
rights and responsibilities with respect to the Registrable Shares.

NOW, THEREFORE, in consideration of the foregoing Recitals,
which are expressly incorporated herein and by this reference made a part
hereof, and of the covenants and agreements contained in this Agreement, the
parties hereto agree as follows:

1. Certain Definitions. As used in this Agreement, the
following terms have the following respective meanings:

1.1 Business Day: any day that is not a
Saturday, Sunday or bank holiday in California.

1.2 Commission: the Securities and Exchange
Commission, or any other federal agency at the time administering the
Securities Act.

1.3 Exchange Act: the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, as they each may from

Page 1 - REGISTRATION RIGHTS AGREEMENT
<PAGE> 2
time to time be in effect. Reference to a particular section of the Exchange
Act shall include a reference to the comparable section, if any, of any such
similar federal statute.

1.4 Registered Shares: the meaning specified in
Recital A.

1.5 Registrable Shares: the meaning specified in
Recital A.

1.6 Registration Statement: the meaning
specified in Recital A.

1.7 Securities Act: the Securities Act of 1933,
as amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, as they may each from time to time be in effect.
References to a particular section of the Securities Act shall include a
reference to the comparable section, if any, of such similar federal statute.

2. Obligations of POI. POI shall:

2.1 Registration. File the Registration
Statement with the Commission, and thereafter use all reasonable efforts to
cause the Registration Statement to be declared effective, in each case as soon
as possible, but in no event later than ten (10) days after the date hereof.

2.2 Amendments and Supplements. Use all
reasonable efforts to prepare and file with the Commission all such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of Registered Shares for a period of two (2) years or, if
earlier, until such time as all of such Registered Shares either (i) have been
disposed of by the seller or sellers thereof in accordance with the intended
methods of disposition thereof or (ii) are eligible for distribution to the
public pursuant to Rule 144 (or any successor rule) under the Securities Act;
provided, however, that such two (2) year period shall be extended for a period
of time equal to the period Shareholder refrains from selling Registered Shares
at the request of POI or of an underwriter of Common Stock (or other securities
of POI) pursuant to the provisions hereof.

2.3 Copies of Prospectus. Furnish to Shareholder
such numbers of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary prospectus) as
Shareholder may reasonably request in order to effect the sale of the
Registered Shares to be offered and sold by Shareholder, but only while POI is
required to cause the registration statement to remain effective and unusable.

2.4 Blue Sky Laws. Use all reasonable efforts to
register or qualify the offering of Registrable Shares covered by the
registration statement under the securities laws of such states as the
Shareholder(s) shall reasonably request; provided, however, that POI shall not
be required in connection with this Section 2.4 to qualify generally to do
business as a foreign corporation under the laws of any jurisdiction in which
POI is not then so qualified, or to file any general consent to service of
process or to take any other action that would subject POI to general service
of process in any jurisdiction in which POI is not then so subject.

2.5 Amendment to Prospectus. Notify Shareholder
at any time when a prospectus relating to such registration is required under
the Securities Act to be delivered of the happening of an event that requires
the making of a change in such prospectus as then in effect, or the related
registration statement, in order that such document(s) 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 Shareholder thereupon shall immediately cease making offers and
sales of Registrable Shares pursuant to the registration statement or
deliveries of the prospectus contained therein for any purpose, and if
requested by POI, shall return to POI all copies of such prospectus not
theretofore delivered by Shareholder to third parties. After securing such
approvals as may be necessary, POI shall promptly prepare, file with Commission
and furnish to Shareholder revised prospectuses or such

Page 2 - REGISTRATION RIGHTS AGREEMENT
<PAGE> 3
supplements to or amendments of the prospectus as POI may deem necessary, and
following their receipt of the same, Shareholder shall be free to resume making
offers of the Registered Shares.

2.6 Stop Orders. Notify Shareholder of any stop
order or any similar proceeding initiated by any federal or state regulatory
authority with respect to the registration statement.

2.7 Listing. Cause all Registered Shares hereto
to be listed on each securities exchange, if any, on which the Common Stock is
then listed or with the National Association of Securities Dealers, Inc.

3. Conditions to Obligations of POI. The obligations of
POI under Section 2 hereof are subject to the satisfaction of each of the
following conditions:

3.1 Information. Shareholder shall furnish to
POI such information regarding Shareholder, its Registrable Shares (and
Shareholder's other holdings of POI securities, if any) and Shareholder's
proposed methods of distribution of its Registered Shares, and shall execute
and deliver to POI such documents, as POI may request in order to permit POI to
comply with all applicable requirements of the Securities Act or any applicable
state securities law or to obtain acceleration of the effective date of the
registration statement. Without limiting the generality of the foregoing,
Shareholder hereby represents and warrants that all information set forth in
the prospectus contained in any draft Registration Statement with respect to
Shareholder, Shareholder's Registerable Shares and other holdings of POI's
securities (if any) and Shareholder's proposed methods of distributing the
Registrable Shares is and shall be complete and accurate.

3.2 Compliance with Agreement. Shareholder shall
have complied with all terms and conditions of this Agreement to be complied
with by Shareholder.

4. Allocation of Expenses. All discounts, commissions
or fees of underwriters, selling brokers, dealer managers or similar securities
industry professionals relating to the distribution of Registered Shares, and
all fees and expenses of separate counsel and accountants for Shareholder, if
any, shall be borne by Shareholder pro rata with the number of Registered
Shares owned by it. Except as otherwise required by any federal or state
regulatory authority, POI shall bear all other expenses incurred by POI in
performing its obligations hereunder, including, without limitation,
registration and filing fees, fees and expenses of complying with applicable
state securities laws, fees and expenses incurred in connection with the
listing of Registered Shares on any securities exchange or with the National
Association of Securities Dealers, printing expenses, fees and disbursements of
counsel for, and independent certified public accountants of, POI, and fees and
expenses of any other party or parties retained by POI in connection with the
applicable registration.

5. Restrictive Legends; Restrictions on Resale.

5.1 Legend. Each certificate representing
Registrable Shares shall be stamped or otherwise imprinted with a legend in
substantially the following form:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS. THE SALE, TRANSFER, PLEDGE OR ANY OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THESE CERTIFICATES IS SUBJECT TO THE TERMS OF A
REGISTRATION RIGHTS AGREEMENT DATED AS OF SEPTEMBER 30, 1996, BETWEEN
THE ISSUER AND THE HOLDER THEREOF."

Notwithstanding the foregoing provisions of this Section 5, upon the request of
a holder of such Registrable Shares which holder (a) is not an affiliate (as
such term is defined in Rule 144 under the

Page 3 - REGISTRATION RIGHTS AGREEMENT
<PAGE> 4
Securities Act) of POI, and (b) has not been an affiliate of POI during the
three (3) months preceding such request, and which request is made after a
period of three (3) years has elapsed since the later of the date such
Registrable Shares were acquired from the POI or an affiliate of the issuer
(computed in accordance with paragraph (d) of Rule 144), POI shall issue and
deliver to such holder, at no expense to such holder, a new certificate
representing such Registrable Shares of like tenor not bearing the first
sentence of such legend.

5.2 Restrictions on Resale. Shareholder shall
not offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, make any short sale or otherwise transfer or dispose of,
directly or indirectly, the Registrable Shares between the date hereof and
October 16, 1996. Shareholder shall also not sell more than ten percent (10%)
of the Registrable Shares between October 17, 1996 and ninety (90) days
following the effective date of the Registration Statement. Shareholder's sale
of the Registrable Shares shall be subject, for a period commencing on the date
hereof and ending one (1) year after the effective date of the Registration
Statement, to any restrictions POI's underwriter or underwriters may impose on
Shareholder's sale of the Registrable Shares including without limitation that
the Registrable Shares be withheld from the market by Shareholder and not be
sold, offered for sale or otherwise transferred or disposed of by Shareholder
(other than donees who agree to be similarly bound) in the event POI or any
subsidiary of POI elects to prepare and file with the Commission a Registration
Statement for an underwritten public offering of the Common Stock or securities
convertible into or exchangeable for Common Stock, at the option of POI or the
proposed managing underwriter(s) of such offering for a period beginning on the
effective date of such Registration Statement as such underwriter(s) determine
is necessary in order to successfully effect the underwritten public offering;
provided, however, that such restrictions shall not apply for a consecutive
period of more than one hundred twenty (120) days and the underwriter or
underwriters may apply them to Shareholder only once during such one (1) year
period of time. In connection therewith, Shareholder also agrees to provide to
POI's underwriter or underwriters a written agreement for the benefit of the
underwriters and POI that Shareholder agrees to such restrictions. The
Registered Shares shall be sold by Shareholder only through broker-dealers
designated by POI and only in such amounts and at such times as the
broker-dealers designated by POI in their reasonable business judgment
determine are not likely to have a material adverse effect on the trading price
of the Common Stock.

6. Miscellaneous.

6.1 Notices. All notices, requests, consents,
demands and other communications provided for by this Agreement shall be in
writing and shall be deemed to have been duly given or made (i) when delivered
by hand or by a courier service, (ii) when sent by telecopier of sent on a
Business Day or if so sent on a day that is not a Business Day, on the first
Business Day thereafter, or (iii) three Business Days after being sent by
registered or certified first-class mail, in each case addressed as follows:

6.1.1 If to Shareholder, at Shareholder's
address as it shall then appear in the books and records of the transfer agent
for the Common Stock.

6.1.2 If to POI, initially at the address
set forth in the Plan, and thereafter at such other address notice of which is
given in accordance with the provisions of this Section 6.1.

6.2 Entire Agreement. This Agreement embodies
the entire understanding and agreement among the parties hereto with respect to
the subject matter hereof and supersedes all prior discussions, negotiations,
understandings and agreements relating to such subject matter hereof.

6.3 Third Party Beneficiaries. This Agreement is
intended to, and shall, inure to the benefit only of the parties hereto and
their respective successors and permitted assigns.

Page 4 - REGISTRATION RIGHTS AGREEMENT
<PAGE> 5
6.4 Assignment. Neither this Agreement nor the
rights or obligations hereunder of any party hereto may be assigned, delegated
or otherwise transferred by any such party, except that Shareholder shall be
entitled to assign its rights under this Agreement to its stockholders, Robert
P. Thompson, George T. Nuttle and Donald A. Buss, pursuant to a plan of
liquidation adopted in connection with the dissolution of Shareholder.

6.5 Amendments. This Agreement may be amended,
supplemented or (except as hereinafter expressly provided to the contrary)
terminated, and the time for the performance of any of the covenants to be
performed by POI hereunder for the benefit of the Shareholder may be extended,
or such performance may be waived, only by a writing executed by POI and
Shareholder.

6.6 Counterparts. This Agreement may be executed
in several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

6.7 Headings. The headings of this Agreement
have been added for convenience only and shall not be used in any way to
construe or otherwise affect this Agreement.

6.8 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Oregon applicable to agreements made and wholly performed in such state.

IN WITNESS WHEREOF, the undersigned have hereunto set
their hands as of the day and year first above writing.

POI:

PROTECTION ONE, INC.

By: John E. Mack, III
-------------------------------
Its: Vice President
------------------------------

SHAREHOLDER:

SEQUENCE SYSTEMS, INC., dba ALLTEC SECURITY SYSTEMS

By: Robert P. Thompson
-------------------------------
Robert P. Thompson, President

Page 5 - REGISTRATION RIGHTS AGREEMENT

<PAGE> 1
REGISTRATION RIGHTS AGREEMENT

DATED: October 4, 1996

BETWEEN: Protection One, Inc.,
a Delaware corporation
3900 S.W. Murray Boulevard
Beaverton, Oregon 97005
("POI")

AND: Herbert H. Warrick, Jr. and Ramona L. Warrick
7714 89th Place SE
Mercer Island, WA 98040
(the "Shareholder")

RECITALS

A. Pursuant to that certain Agreement for Stock Purchase
and the Plan of Exchange of Shares (collectively the "Stock Agreement"), POI
(i) concurrently with the execution of this Registration Rights Agreement (the
"Agreement") is issuing and selling to Shareholder an aggregate of 264,203
shares (the "Registrable Shares") of the Common Stock, par value $.01 per share
("Common Stock"), of POI; and (ii) has agreed to file with the Securities and
Exchange Commission, as soon as possible, a registration statement on Form S-3
(as from time to time amended, the "Registration Statement") registering the
offer and sale by Shareholder from time to time of the Registrable Shares
included therein (the "Registered Shares"); and

B. Section 11.9 of the Stock Agreement contemplates that
the Shareholder will enter into this Agreement to further define their
respective rights and responsibilities with respect to the Registrable Shares.

NOW, THEREFORE, in consideration of the foregoing and of the
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:

1. Certain Definitions. As used in this Agreement, the
following terms have the following respective meanings:

1.1 Business Day: any day that is not a
Saturday, Sunday or bank holiday in California.

1.2 Commission: the Securities and Exchange
Commission, or any other federal agency at the time administering the
Securities Act.

REGISTRATION RIGHTS AGREEMENT

<PAGE> 2

1.3 Exchange Act: the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, as they each may from time to time be in effect.
Reference to a particular section of the Exchange Act shall include a reference
to the comparable section, if any, of any such similar federal statute.

1.4 Registered Shares: the meaning specified in
Recital A.

1.5 Registrable Shares: the meaning specified in
Recital A.

1.6 Registration Statement: the meaning
specified in Recital A.

2. Obligations of POI. POI shall:

2.1 Registration. File the Registration
Statement with the Commission within 20 days of the date of this Agreement, and
thereafter use all reasonable efforts to cause the Registration Statement to be
declared effective as soon as possible.

2.2 Amendments and Supplements. Use all
reasonable efforts to prepare and file with the Commission all such amendments
and supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of Registered Shares for a period of two (2) years or, if
earlier, until such time as all of such Registered Shares either (i) have been
disposed of by the seller or sellers thereof in accordance with the intended
methods of disposition thereof or (ii) are eligible for distribution to the
public pursuant to Rule 144 (or any successor rule) under the Securities Act;
provided, however, that such two (2) year period shall be extended for a period
of time equal to the period Shareholder refrains from selling Registered Shares
at the request of POI or of an underwriter of Common Stock (or other securities
of POI) pursuant to the provisions hereof.

2.3 Copies of Prospectus. Furnish to Shareholder
such numbers of copies of the prospectus contained in such Registration
Statement (including each preliminary prospectus and any summary prospectus) as
Shareholder may reasonably request in order to effect the sale of the
Registered Shares to be offered and sold by Shareholder, but only while POI is
required to cause the Registration Statement to remain effective and usable.

REGISTRATION RIGHTS AGREEMENT

<PAGE> 3

2.4 Blue Sky Laws. Use all reasonable efforts to
register or qualify the offering of Registrable Shares covered by the
Registration Statement under the securities laws of such states as the
Shareholder(s) shall reasonably request; provided, however, that POI shall not
be required in connection with this Section 2.4 to qualify generally to do
business as a foreign corporation under the laws of any jurisdiction in which
POI is not then so qualified, or to file any general consent to service of
process or to take any other action that would subject POI to general service
of process in any jurisdiction in which POI is not then so subject.

2.5 Amendment to Prospectus. Notify Shareholder
at any time when a prospectus relating to such registration is required under
the Securities Act to be delivered of the happening of an event that requires
the making of a change in such prospectus as then in effect, or the related
Registration Statement, in order that such document(s) 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 Shareholder thereupon shall immediately cease making offers and
sales of Registrable Shares pursuant to the Registration Statement or
deliveries of the prospectus contained therein for any purpose, and if
requested by POI, shall return to POI all copies of such prospectus not
theretofore delivered by Shareholder to third parties. After securing such
approvals as may be necessary, POI shall promptly prepare, file with Commission
and furnish to Shareholder revised prospectuses or such supplements to or
amendments of the prospectus as POI may deem necessary, and following their
receipt of the same, Shareholder shall be free to resume making offers of the
Registered Shares.

2.6 Stop Orders. Notify Shareholder of any stop
order or any similar proceeding initiated by any federal or state regulatory
authority with respect to the Registration Statement.

2.7 Listing. Cause all Registered Shares hereto
to be listed on each securities exchange, if any, on which the Common Stock is
then listed or with the National Association of Securities Dealers, Inc.

3. Conditions to Obligations of POI. The obligations of
POI under Section 2 hereof are subject to the satisfaction of each of the
following conditions:

3.1 Information. Shareholder shall furnish to
POI such information regarding Shareholder, its Registrable Shares (and
Shareholder's other holdings of POI securities, if any) and Shareholder's
proposed methods of distribution of its Registered Shares, and shall execute
and deliver to POI such documents, as POI may reasonably request in order to
permit POI to comply with all applicable requirements of the Securities Act or
any applicable state securities law or to obtain acceleration of the effective
date of the Registration Statement. Without limiting the generality of the
foregoing, Shareholder hereby represents and warrants that all information
provided by Shareholder for inclusion in the prospectus with

REGISTRATION RIGHTS AGREEMENT

<PAGE> 4
respect to Shareholder, Shareholder's Registerable Shares and other holdings of
POI's securities (if any) and Shareholder's proposed methods of distributing
the Registrable Shares is and shall be complete and accurate.

3.2 Compliance with Agreement. Shareholder shall
have complied with all terms and conditions of this Agreement to be complied
with by Shareholder.

5. Restrictive Legends; Restrictions on Resale.

5.1 Legend. Each certificate representing
Registrable Shares shall be stamped or otherwise imprinted with a legend in
substantially the following form:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS. THE SALE, TRANSFER, PLEDGE OR ANY OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THESE CERTIFICATES IS SUBJECT TO THE TERMS OF A
REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER 4, 1996, BETWEEN THE
ISSUER AND THE HOLDER THEREOF."

Notwithstanding the foregoing provisions of this Section 5, upon the request of
a holder of such Registrable Shares which holder (a) is not an affiliate (as
such term is defined in Rule 144 under the Securities Act) of POI, and (b) has
not been an affiliate of POI during the three (3) months preceding such
request, and which request is made after a period of three (3) years has
elapsed since the later of the date such Registrable Shares were acquired from
the POI or an affiliate of the issuer (computed in accordance with paragraph
(d) of Rule 144), POI shall issue

REGISTRATION RIGHTS AGREEMENT

<PAGE> 5
and deliver to such holder, at no expense to such holder, a new certificate
representing such Registrable Shares of like tenor not bearing the first
sentence of such legend.

6. Miscellaneous.

6.1.1 If to Shareholder, at Shareholder's
address as it shall then appear in the books and records of the transfer agent
for the Common Stock.

6.1.2 If to POI, initially at the address
set forth in the Stock Agreement, and thereafter at such other address notice
of which is given in accordance with the provisions of this Section 7.1.

REGISTRATION RIGHTS AGREEMENT

<PAGE> 6
6.2 Entire Agreement. This Agreement embodies
the entire understanding and agreement among the parties hereto with respect to
the subject matter hereof and supersedes all prior discussions, negotiations,
understandings and agreements relating to such subject matter hereof.

6.3 Third Party Beneficiaries. This Agreement is
intended to, and shall, inure to the benefit only of the parties hereto and
their respective successors and permitted assigns.

6.4 Assignment. Neither this Agreement nor the
rights or obligations hereunder of any party hereto may be assigned, delegated
or otherwise transferred by any such party.

6.6 Counterparts. This Agreement may be executed
in several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

6.7 Headings. The headings of this Agreement
have been added for convenience only and shall not be used in any way to
construe or otherwise affect this Agreement.

6.8 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Oregon applicable to agreements made and wholly performed in such state.

IN WITNESS WHEREOF, the undersigned have hereunto set their
hands as of the day and year first above writing.

POI:

PROTECTION ONE, INC.

By:_________________________________

Its:_________________________________

SHAREHOLDER:

REGISTRATION RIGHTS AGREEMENT

<PAGE> 7
_______________________________________
Herbert H. Warrick, Jr.

_______________________________________
Ramona L. Warrick

REGISTRATION RIGHTS AGREEMENT

<PAGE> 8
REGISTRATION RIGHTS AGREEMENT

DATED: October 4, 1996

BETWEEN: Protection One, Inc.,
a Delaware corporation
3900 S.W. Murray Boulevard
Beaverton, Oregon 97005
("POI")

AND: Russell E. VanDevanter
P. O. Box 55832
Seattle, WA 98155
(the "Shareholder")

RECITALS

A. Pursuant to that certain Agreement for Stock Purchase
and the Plan of Exchange of Shares (collectively the "Stock Agreement"), POI
(i) concurrently with the execution of this Registration Rights Agreement (the
"Agreement") is issuing and selling to Shareholder an aggregate of 247,029
shares (the "Registrable Shares") of the Common Stock, par value $.01 per share
("Common Stock"), of POI; and (ii) has agreed to file with the Securities and
Exchange Commission, as soon as possible, a registration statement on Form S-3
(as from time to time amended, the "Registration Statement") registering the
offer and sale by Shareholder from time to time of the Registrable Shares
included therein (the "Registered Shares"); and

NOW, THEREFORE, in consideration of the foregoing and of the
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:

1. Certain Definitions. As used in this Agreement, the
following terms have the following respective meanings:

1.1 Business Day: any day that is not a
Saturday, Sunday or bank holiday in California.

1.2 Commission: the Securities and Exchange
Commission, or any other federal agency at the time administering the
Securities Act.

1.3 Exchange Act: the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, as

<PAGE> 9
they each may from time to time be in effect. Reference to a particular
section of the Exchange Act shall include a reference to the comparable
section, if any, of any such similar federal statute.

1.4 Registered Shares: the meaning specified in
Recital A.

1.5 Registrable Shares: the meaning specified in
Recital A.

1.6 Registration Statement: the meaning
specified in Recital A.

2. Obligations of POI. POI shall:

<PAGE> 10
shall not be required in connection with this Section 2.4 to qualify generally
to do business as a foreign corporation under the laws of any jurisdiction in
which POI is not then so qualified, or to file any general consent to service
of process or to take any other action that would subject POI to general
service of process in any jurisdiction in which POI is not then so subject.

2.5 Amendment to Prospectus. Notify Shareholder
at any time when a prospectus relating to such registration is required under
the Securities Act to be delivered of the happening of an event that requires
the making of a change in such prospectus as then in effect, or the related
Registration Statement, in order that such document(s) 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 Shareholder thereupon shall immediately cease making offers and
sales of Registrable Shares pursuant to the Registration Statement or
deliveries of the prospectus contained therein for any purpose, and if
requested by POI, shall return to POI all copies of such prospectus not
theretofore delivered by Shareholder to third parties. After securing such
approvals as may be necessary, POI shall promptly prepare, file with Commission
and furnish to Shareholder revised prospectuses or such supplements to or
amendments of the prospectus as POI may deem necessary, and following their
receipt of the same, Shareholder shall be free to resume making offers of the
Registered Shares.

2.6 Stop Orders. Notify Shareholder of any stop
order or any similar proceeding initiated by any federal or state regulatory
authority with respect to the Registration Statement.

2.7 Listing. Cause all Registered Shares hereto
to be listed on each securities exchange, if any, on which the Common Stock is
then listed or with the National Association of Securities Dealers, Inc.

3. Conditions to Obligations of POI. The obligations of
POI under Section 2 hereof are subject to the satisfaction of each of the
following conditions:

3.1 Information. Shareholder shall furnish to
POI such information regarding Shareholder, its Registrable Shares (and
Shareholder's other holdings of POI securities, if any) and Shareholder's
proposed methods of distribution of its Registered Shares, and shall execute
and deliver to POI such documents, as POI may reasonably request in order to
permit POI to comply with all applicable requirements of the Securities Act or
any applicable state securities law or to obtain acceleration of the effective
date of the Registration Statement. Without limiting the generality of the
foregoing, Shareholder hereby represents and warrants that all information
provided by Shareholder for inclusion in the prospectus with respect to
Shareholder, Shareholder's Registerable Shares and other holdings of POI's
securities (if any) and Shareholder's proposed methods of distributing the
Registrable Shares is and shall be complete and accurate.

<PAGE> 11
3.2 Compliance with Agreement. Shareholder shall
have complied with all terms and conditions of this Agreement to be complied
with by Shareholder.

5. Restrictive Legends; Restrictions on Resale.

5.1 Legend. Each certificate representing
Registrable Shares shall be stamped or otherwise imprinted with a legend in
substantially the following form:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS. THE SALE, TRANSFER, PLEDGE OR ANY OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THESE CERTIFICATES IS SUBJECT TO THE TERMS OF A
REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER 4, 1996, BETWEEN THE
ISSUER AND THE HOLDER THEREOF."

5.2 Restrictions on Resale. Shareholder shall
not offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell,

<PAGE> 12
grant any option, right or warrant to purchase, make any short sale or
otherwise transfer or dispose of, directly or indirectly, the Registrable
Shares between the date hereof and October 16, 1996. Shareholder shall also
not sell more than ten percent (10%) of the Registrable Shares between October
17, 1996 and ninety (90) days following the effective date of the Registration
Statement. Shareholder's sale of the Registrable Shares shall be subject, for
a period commencing on the date hereof and ending one (1) year after the
effective date of the Registration Statement, to any restrictions POI's
underwriter or underwriters may impose on Shareholder's sale of the Registrable
Shares including without limitation that the Registrable Shares be withheld
from the market by Shareholder and not be sold, offered for sale or otherwise
transferred or disposed of by Shareholder (other than donees who agree to be
similarly bound) in the event POI or any subsidiary of POI elects to prepare
and file with the Commission a Registration Statement for an underwritten
public offering of the Common Stock or securities convertible into or
exchangeable for Common Stock, at the option of POI or the proposed managing
underwriter(s) of such offering for a period beginning on the effective date of
such Registration Statement as such underwriter(s) determine is necessary in
order to successfully effect the underwritten public offering; provided,
however, that such restrictions shall not apply for a consecutive period of
more than one hundred twenty (120) days and the underwriter or underwriters may
apply them to Shareholder only once during such one (1) year period of time.
In connection therewith, Shareholder also agrees to provide to POI's
underwriter or underwriters a written agreement for the benefit of the
underwriters and POI that Shareholder agrees to such restrictions. The
Registered Shares shall be sold by Shareholder only through broker- dealers
designated by POI.

6. Miscellaneous.

6.1.1 If to Shareholder, at Shareholder's
address as it shall then appear in the books and records of the transfer agent
for the Common Stock.

6.1.2 If to POI, initially at the address
set forth in the Stock Agreement, and thereafter at such other address notice
of which is given in accordance with the provisions of this Section 7.1.

<PAGE> 13
6.3 Third Party Beneficiaries. This Agreement is
intended to, and shall, inure to the benefit only of the parties hereto and
their respective successors and permitted assigns.

6.4 Assignment. Neither this Agreement nor the
rights or obligations hereunder of any party hereto may be assigned, delegated
or otherwise transferred by any such party.

6.6 Counterparts. This Agreement may be executed
in several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

6.7 Headings. The headings of this Agreement
have been added for convenience only and shall not be used in any way to
construe or otherwise affect this Agreement.

6.8 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Oregon applicable to agreements made and wholly performed in such state.

IN WITNESS WHEREOF, the undersigned have hereunto set their
hands as of the day and year first above writing.

POI:

PROTECTION ONE, INC.

By:_______________________________

Its:______________________________

SHAREHOLDER:

__________________________________
Russell E. VanDevanter
<PAGE> 14
REGISTRATION RIGHTS AGREEMENT

DATED: October 4, 1996

BETWEEN: Protection One, Inc.,
a Delaware corporation
3900 S.W. Murray Boulevard
Beaverton, Oregon 97005
("POI")

AND: Maria M. VanDevanter
7537 Roosevelt Way NE
Seattle, WA 98115
(the "Shareholder")

RECITALS

A. Pursuant to that certain Agreement for Stock Purchase
and the Plan of Exchange of Shares (collectively the "Stock Agreement"), POI
(i) concurrently with the execution of this Registration Rights Agreement (the
"Agreement") is issuing and selling to Shareholder an aggregate of 40,657
shares (the "Registrable Shares") of the Common Stock, par value $.01 per share
("Common Stock"), of POI; and (ii) has agreed to file with the Securities and
Exchange Commission, as soon as possible, a registration statement on Form S-3
(as from time to time amended, the "Registration Statement") registering the
offer and sale by Shareholder from time to time of the Registrable Shares
included therein (the "Registered Shares"); and

NOW, THEREFORE, in consideration of the foregoing and of the
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:

1. Certain Definitions. As used in this Agreement, the
following terms have the following respective meanings:

1.1 Business Day: any day that is not a
Saturday, Sunday or bank holiday in California.

1.2 Commission: the Securities and Exchange
Commission, or any other federal agency at the time administering the
Securities Act.

<PAGE> 15
1.3 Exchange Act: the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, as they each may from time to time be in effect.
Reference to a particular section of the Exchange Act shall include a reference
to the comparable section, if any, of any such similar federal statute.

1.4 Registered Shares: the meaning specified in
Recital A.

1.5 Registrable Shares: the meaning specified in
Recital A.

1.6 Registration Statement: the meaning
specified in Recital A.

2. Obligations of POI. POI shall:

<PAGE> 16
2.4 Blue Sky Laws. Use all reasonable efforts to
register or qualify the offering of Registrable Shares covered by the
Registration Statement under the securities laws of such states as the
Shareholder(s) shall reasonably request; provided, however, that POI shall not
be required in connection with this Section 2.4 to qualify generally to do
business as a foreign corporation under the laws of any jurisdiction in which
POI is not then so qualified, or to file any general consent to service of
process or to take any other action that would subject POI to general service
of process in any jurisdiction in which POI is not then so subject.

2.5 Amendment to Prospectus. Notify Shareholder
at any time when a prospectus relating to such registration is required under
the Securities Act to be delivered of the happening of an event that requires
the making of a change in such prospectus as then in effect, or the related
Registration Statement, in order that such document(s) 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 Shareholder thereupon shall immediately cease making offers and
sales of Registrable Shares pursuant to the Registration Statement or
deliveries of the prospectus contained therein for any purpose, and if
requested by POI, shall return to POI all copies of such prospectus not
theretofore delivered by Shareholder to third parties. After securing such
approvals as may be necessary, POI shall promptly prepare, file with Commission
and furnish to Shareholder revised prospectuses or such supplements to or
amendments of the prospectus as POI may deem necessary, and following their
receipt of the same, Shareholder shall be free to resume making offers of the
Registered Shares.

2.6 Stop Orders. Notify Shareholder of any stop
order or any similar proceeding initiated by any federal or state regulatory
authority with respect to the Registration Statement.

2.7 Listing. Cause all Registered Shares hereto
to be listed on each securities exchange, if any, on which the Common Stock is
then listed or with the National Association of Securities Dealers, Inc.

3. Conditions to Obligations of POI. The obligations of
POI under Section 2 hereof are subject to the satisfaction of each of the
following conditions:

3.1 Information. Shareholder shall furnish to
POI such information regarding Shareholder, its Registrable Shares (and
Shareholder's other holdings of POI securities, if any) and Shareholder's
proposed methods of distribution of its Registered Shares, and shall execute
and deliver to POI such documents, as POI may reasonably request in order to
permit POI to comply with all applicable requirements of the Securities Act or
any applicable state securities law or to obtain acceleration of the effective
date of the Registration Statement. Without limiting the generality of the
foregoing, Shareholder hereby represents and warrants that all information
provided by Shareholder for inclusion in the prospectus with

<PAGE> 17
respect to Shareholder, Shareholder's Registerable Shares and other holdings of
POI's securities (if any) and Shareholder's proposed methods of distributing
the Registrable Shares is and shall be complete and accurate.

3.2 Compliance with Agreement. Shareholder shall
have complied with all terms and conditions of this Agreement to be complied
with by Shareholder.

5. Restrictive Legends; Restrictions on Resale.

5.1 Legend. Each certificate representing
Registrable Shares shall be stamped or otherwise imprinted with a legend in
substantially the following form:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS. THE SALE, TRANSFER, PLEDGE OR ANY OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THESE CERTIFICATES IS SUBJECT TO THE TERMS OF A
REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER 4, 1996, BETWEEN THE
ISSUER AND THE HOLDER THEREOF."

<PAGE> 18
and deliver to such holder, at no expense to such holder, a new certificate
representing such Registrable Shares of like tenor not bearing the first
sentence of such legend.

6. Miscellaneous.

6.1.1 If to Shareholder, at Shareholder's
address as it shall then appear in the books and records of the transfer agent
for the Common Stock.

6.1.2 If to POI, initially at the address
set forth in the Stock Agreement, and thereafter at such other address notice
of which is given in accordance with the provisions of this Section 7.1.

<PAGE> 19
6.2 Entire Agreement. This Agreement embodies
the entire understanding and agreement among the parties hereto with respect to
the subject matter hereof and supersedes all prior discussions, negotiations,
understandings and agreements relating to such subject matter hereof.

6.3 Third Party Beneficiaries. This Agreement is
intended to, and shall, inure to the benefit only of the parties hereto and
their respective successors and permitted assigns.

6.4 Assignment. Neither this Agreement nor the
rights or obligations hereunder of any party hereto may be assigned, delegated
or otherwise transferred by any such party.

6.6 Counterparts. This Agreement may be executed
in several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

6.7 Headings. The headings of this Agreement
have been added for convenience only and shall not be used in any way to
construe or otherwise affect this Agreement.

6.8 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Oregon applicable to agreements made and wholly performed in such state.

IN WITNESS WHEREOF, the undersigned have hereunto set their
hands as of the day and year first above writing.

POI:

PROTECTION ONE, INC.

By:______________________________________
Its:_____________________________________

SHAREHOLDER:

<PAGE> 20

______________________________________
Maria M. VanDevanter

<PAGE> 1

Exhibit 5.1

[MITCHELL, SILBERBERG & KNUPP LLP LETTERHEAD]

FILE NO: 84345-125
DOC. NO: BECHOLD/LAL_L020.SEC

October 4, 1996

Protection One, Inc.
6011 Bristol Parkway
Culver City, CA 90230

Re: Registration Statement on Form S-3
- Commission File No. 333-

Gentlemen and Ladies:

We have acted as counsel for Protection One, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, pursuant to the above-captioned
registration statement (the "Registration Statement), of the offer and sale by
the Company of up to [XXX,XXX] shares (the "Shares") of the Common Stock, par
value $.01 per share, of the Company issued and issuable pursuant to (i) an
Agreement and Plan of Reorganization dated as of September 30, 1996 (the
"Reorganization Agreement"), among Protection One Alarm Monitoring, Inc., a
Delaware corporation ("Monitoring"), Sequence Systems, Inc., an Oregon
corporation ("Sequence Systems"), and the shareholders of Sequence Systems and
(ii) an Agreement for Stock Purchase dated as of October 4, 1996 (the "Purchase
Agreement"), among Monitoring, Herbert H. Warrick, Jr., Ramona Warrick, Russell
E. VanDevanter and Maria VanDevanter.

In our capacity as counsel for the Company and for purposes of
this opinion letter, we have examined the originals, or copies identified to
our satisfaction as being true copies of the originals, of the following
documents:

1. The Reorganization Agreement and the Purchase
Agreement;

2. The Registration Statement;

3. The Fifth Restated Certificate of
Incorporation and the By-laws of the Company as presently in effect,
each as certified to us by a public official or an officer of the
Company; and

4. Certain resolutions adopted by the Board of
Directors of the Company relating the issuance and sale of the Shares
and related matters.

We have also examined originals, or copies certified or
otherwise identified to our satisfaction, of such records of the Company and
such other agreements, instruments and documents as we have considered
necessary or appropriate to enable us to render the opinions expressed below.
<PAGE> 2
Protection One, Inc.
October 4, 1996
Page 2

In the course of our examinations and investigations, we have
assumed the legal capacity of all natural persons, the genuineness of all
signatures on original documents, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed or to be executed by parties other than the
Company, we have assumed that such parties had or will have the power,
corporate, partnership or other, to enter into and perform all obligations
thereunder and we have also assumed the due authorization by all requisite
action, corporate, partnership or other, the due execution and delivery by such
parties of such documents and the validity, binding effect and enforceability
thereof. As to all facts material to the opinions expressed herein that we
have not independently established or verified, we have relied upon statements
and representations of officers and other representatives of the Company and
others.

Based upon and subject to the foregoing, it is our opinion
that the Shares have been duly authorized, and when issued and delivered in
accordance with the terms of the Reorganization Agreement or the Purchase
Agreement, as applicable, will be legally issued, fully paid and nonassessable.

We hereby consent to the filing of this opinion letter as an
exhibit to the Registration Statement and to the reference to our firm under
the caption "Legal Matters" in the Registration Statement. In giving such
consent, we do not hereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations thereunder. The opinions expressed
herein are given as of the date hereof, and we assume no obligation to advise
you of changes that may hereafter be brought to our attention.

Very truly yours,

/s/ MITCHELL, SILBERBERG & KNUPP LLP

MITCHELL, SILBERBERG & KNUPP LLP

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this Registration Statement of
Protection One, Inc. on Form S-3 (File No. 333-_____) of our report, which
includes an explanatory paragraph with respect to a change in method of
accounting for certain subscriber account acquisition and transition costs,
dated December 12, 1996, on our audits of the consolidated financial statements
and financial statement schedule of Protection One, Inc. and Subsidiaries as of
September 30, 1995 and 1994, and for each of the three years in the period
ended September 30, 1995, which report is included in the Protection One, Inc.
1995 Annual Report on Form 10-K as amended by Amendment No. 1 on Form 10-K/A.

COOPERS & LYBRAND L.L.P.

Portland, Oregon
October 3, 1996

<PAGE> 1

EXHIBIT 23.2

INDEPENDENT ACCOUNTANTS' CONSENT

We consent to incorporation by reference in the registration statement filed on
Form S-3 of Protection One, Inc. of our reports dated March 29, 1996 and
February 10, 1995, except as to note 12 which is as of April 4, 1995, relating
to the consolidated balance sheets of Metrol Security Services, Inc. as of
December 31, 1995 and 1994 and December 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' deficiency and cash flows
for the years ended December 31, 1995, 1994 and 1993, which reports appear in
Protection One, Inc.'s Form 8-K/A dated June 28, 1996.

KPMG Peat Marwick LLP

Phoenix, Arizona
October 4, 1996