Exhibit 10.1

EXECUTION COPY

STOCKHOLDERS AGREEMENT

STOCKHOLDERS AGREEMENT, dated as of February 8, 2005, by and among Quadrangle Master Funding Ltd, a Cayman Islands limited company (together with any of its Affiliates that receive Common Shares in a Permitted Transfer (as defined below), “ QDRF ”), POI Acquisition, LLC, a Delaware limited liability company (together with any of its Affiliates that receive Common Shares in a Permitted Transfer, “ POI Acquisition ”), and Protection One, Inc., a Delaware corporation (the “ Company ”).  Each of QDRF and POI Acquisition is referred to individually as a “ Stockholder ” and, collectively, as the “ Stockholders ”.

WHEREAS, (i) POI Acquisition owns two-thirds of the outstanding shares of common stock of POI Acquisition I, Inc (“ PAII ”), which directly owns approximately 88% of the outstanding shares of common stock of the Company, and QDRF owns one-third of the outstanding shares of common stock of PAII and (ii) POI Acquisition owns two-thirds of the lenders’ rights under a Revolving Credit Facility with Protection One Alarm Monitoring, Inc, (“ POAM ”) a wholly-owned Subsidiary of the Company, dated December 21, 1998 (as modified, amended, renewed, extended or restated from time to time, the “ Credit Facility ”) and QDRF owns one-third of the lenders’ rights under the Credit Facility;

WHEREAS, pursuant to an exchange agreement dated as of November 12, 2004 (the “ Exchange Agreement ”), in connection with discharge of certain indebtedness under the Credit Facility, the Company will issue 10,666,667 Common Shares (as defined below) to POI Acquisition and 5,333,333 Common Shares to QDRF (the “ Restructuring ”); and

WHEREAS, in connection with the Restructuring the Company and each of the Stockholders desire to make certain arrangements among themselves with respect to the matters set forth herein;

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

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

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

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

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

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

Cash Equivalents :  Any of the following:

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

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

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

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

Closing :  As defined in the Exchange Agreement.

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

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

Excluded Securities :  As defined in Section 5.2 herein.

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

2

officer, employee, partner, creditor, customer, supplier or other person and (y) who does not have a relationship with the Company that may interfere with his exercise of independence from management and the Company.

Listing Event :  Approval of the Company’s application to list its Common Shares on the New York Stock Exchange or the NASDAQ Stock Market.

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

Permitted Transfer : As defined in Section 3.2.

Permitted Transferee : As defined in Section 3.2.

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

POI Acquisition :  As defined in the recitals.

Protection One Entities :  The Company and its Subsidiaries.

QDRF :  As defined in the recitals.

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

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

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

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

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

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

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

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

3

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

ARTICLE II

CORPORATE GOVERNANCE

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

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

(ii)                                   one shall be designated by QDRF (the “ QDRF Designee ”);

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

(iv)                                 one shall be an Independent Person selected by a majority of the other directors.

(b)                        At such time as POI Acquisition shall cease to own Common Shares in an amount equal to at least 25% of the Common Shares issued and outstanding as of the Closing, POI Acquisition shall have the right to designate one Acquisition Designee rather than two Acquisition Designees pursuant to Section 2.1(a) above.  At such time as POI Acquisition shall cease to own Common Shares in an amount equal to at least 10% of the Common Shares issued and outstanding as of the Closing, POI Acquisition shall cease to have the right to designate a director to the Board of Directors pursuant to Section 2.1(a) above.  Upon each of the triggering events set forth in this Section 2.1(b) above, POI Acquisition shall promptly cause one of its Acquisition Designees to resign from the Board of Directors and all committees thereof.  Upon any such resignation, the Stockholders will use their reasonable best efforts to cause the directors remaining in office to either decrease the size of the Board of Directors to eliminate such vacancy or cause the vacancy created thereby to be filled by a designee selected by a majority of the directors remaining in office.

(c)                         At such time as QDRF shall cease to own Common Shares in an amount equal to at least 10% of the Common Shares issued and outstanding as of the Closing, QDRF shall cease to have the right to designate a director to the Board of Directors pursuant to Section 2.1(a) above and QDRF shall promptly cause its QDRF Designee to resign from the Board of Directors and all committees thereof.  Upon any such resignation, the Stockholders will use their reasonable best efforts to cause the directors remaining in office to either decrease the size of the

4

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

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

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

(f)                           Until such time as POI Acquisition ceases to own Common Shares in an amount equal to at least 40% of the Common Shares issued and outstanding as of the Closing, POI Acquisition shall have the right, exercisable at any time upon delivery of written notice to QDRF and the Company, to elect to cause the Board of Directors to be increased to include one additional director and designate a new director (the “ Acquisition Election ”).  Upon making the Acquisition Election, the Stockholders (and their respective Stockholder Designees) and the Company shall use their reasonable best efforts to take all appropriate action to cause the size of the Board of Directors to be increased to include a director designated by POI Acquisition.  Upon making the Acquisition Election, (i) the number of Acquisition Designees set forth in Section 2.1(a)(i) shall be increased by one and (ii) at such time as POI Acquisition shall cease to own Common Shares in an amount equal to at least 40% of the Common Shares issued and outstanding as of the Closing, POI Acquisition shall promptly cause one of its Acquisition Designees to resign from the Board of Directors and all committees thereof.  Upon any such resignation, the Stockholders will use their reasonable best efforts to cause the directors remaining in office to either decrease the size of the Board of Directors to eliminate such vacancy or cause the vacancy created thereby to be filled by a designee selected by a majority of the directors remaining in office.

(g)                        If any Stockholder entitled to designate directors hereunder requests in writing that any of its designees be removed as a director, the other Stockholder shall vote, or act by written consent with respect to, all Common Shares owned directly or indirectly by such other Stockholder and otherwise take or cause to be taken all actions necessary to remove such director

5

designated by such Stockholder.  Unless a Stockholder shall otherwise request in writing, no other Stockholder shall take any action to cause the removal of any directors designated by such Stockholder.  In the event that a vacancy is created at any time by the death, disability, retirement, resignation or removal (with or without cause) of any director designated by a Stockholder, so long as such Stockholder has the right to designate a replacement designee at such time, the Company and the other Stockholder shall use their reasonable best efforts to take all appropriate action necessary to cause the vacancy created thereby to be filled by the replacement designated by such Stockholder.

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

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

Section 2.2.                                    Bylaws .  (a)  At the first meeting of the Board of Directors following the date of this Agreement, the Stockholders shall vote to amend the bylaws of the Company as in effect on the date hereof to provide that, in addition to any vote or consent of the Board of Directors or the stockholders of the Company required by law or the Company’s certificate of incorporation, if and for so long as QDRF retains the right to designate the QDRF Designee pursuant to Section 2.1(a), the Company shall not take any of the following actions without the consent of QDRF:

(i)                                      voluntarily initiate any bankruptcy, dissolution or winding up or any analogous proceeding in any jurisdiction with respect to any of the Protection One Entities;

(ii)                                   merge or consolidate with any other Person (other than (i) a transaction between the Company and one or more of its wholly-owned Subsidiaries, (ii) a transaction subject to the provisions of Section 4.3 or (iii) a transaction occurring more than two years after the Closing);

(iii)                                sell all or substantially all of the assets of the Company; or

(iv)                               obligate or otherwise commit to do any of the foregoing.

6

(b)  If and for so long as the consent of QDRF described in Section 2.2(a) above is required, without the prior consent of QDRF, neither the Company nor any other Stockholder shall take any action to amend the bylaws of the Company in any manner that would impair QDRF’s exercise of such rights.

(c)  For purposes of this Agreement, a Stockholder shall be deemed to own its proportional interest of any Common Shares held by a Person beneficially owned by such Stockholder (determined based on such Stockholder’s pro rata direct or indirect equity interest in such Person), including, without limitation, Common Shares held by PAII.

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

ARTICLE III

TRANSFERS

Section 3.1.                                    Transfer Restrictions .  (a)  Subject to compliance with Sections 3.3 and 3.4, QDRF may directly or indirectly offer, transfer, sell, assign, pledge or otherwise dispose of any economic, voting or other rights in or to (any such act, a “ transfer ”) all or a portion of its Common Shares at any time (i) in a Permitted Transfer, (ii) in a transfer pursuant to Sections 4.2 or 4.3 or (iii) subject to compliance with Section 4.1, in any other transfer.

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

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

(b)                        To the extent a Stockholder or Permitted Transferee described in clause (i) above is not an individual or an estate, and a Person (which is not a Permitted Transferee of the Stockholder or of such Permitted Transferee, as the case may be) acquires Control of such Stockholder or Permitted Transferee, (x) such acquisition of Control shall be deemed to be a transfer of the Common Shares held by such Stockholder or Permitted Transferee subject to the

7

restrictions on transfer contained in this Agreement (including, without limitation, Arti