Exhibit 10.26


 


EMPLOYMENT
AGREEMENT


 


THIS
EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of the 18th day of
March, 2003 by and between Protection One, Inc., a Delaware corporation (the
“Company”), and Darius G. Nevin (“Executive”).


 


W I T N E S
S E T H


 


WHEREAS, the
Company and Executive entered into an Employment Agreement dated as of August
1, 2001 and amended that agreement by an instrument dated November 19, 2002
(such agreement as so amended being hereinafter referred to as the “Prior Employment
Agreement”); and


 


WHEREAS, the
Board (as defined in Section 1) has determined that it is in the best interest
of the Company and its stockholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the possibility, threat
or occurrence of a Change in Control (as defined below), and to encourage the
Executive’s full attention and dedication to the Company currently and in the
event of a threat or occurrence of a Change in Control and to provide the
Executive with compensation and benefits arrangements which are competitive
with those of other comparable corporations; and


 


WHEREAS, the
Board has authorized the Company to enter into this Agreement.


 


NOW,
THEREFORE, for and in consideration of the premises and the mutual covenants
and agreements herein contained, the Company and Executive hereby agree as follows:


 

















 


1.                                       Definitions.  As used in this Agreement, the following
terms shall have the respective meanings set forth below:


 


a.               “Board” means the
Board of Directors of the Company.


 


b.              “Bonus Amount”
means: (i) for a Date of Termination or Change in Control occurring in fiscal
year 2003, the annual incentive bonuses payable by the Company to or for the
benefit of or deferred by Executive for the 2002 fiscal year of the Company;
(ii) for a Date of Termination or a Change in Control occurring in fiscal year
2004, the average of the annual incentive bonuses payable by the Company to or
for the benefit of or deferred by Executive for the 2002 and 2003 fiscal years of
the Company; and (iii) for a Date of Termination or Change in Control occurring
after fiscal year 2004, the average of the annual incentive bonuses payable by
the Company to or for the benefit of or deferred by Executive for the last
three (3) completed fiscal years of the Company immediately preceding the Date
of Termination or Change in Control.


 


c.               “Cause” means
(i) the willful and continued failure of Executive to perform
substantially his duties with the Company (other than any such failure resulting
from Executive’s incapacity due to physical or mental illness or any such
failure subsequent to Executive being delivered a Notice of Termination without
Cause by the Company or Executive delivering a Notice of Termination for Good
Reason to the Company) that is not remedied within 30 days after a written demand
for substantial performance


 


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is delivered to Executive by the Chief Executive Officer of the Company
which specifically identifies the manner in which Executive has not
substantially performed Executive’s duties, or (ii) the willful engaging
by Executive in illegal conduct which is demonstrably and materially injurious
to the Company.  For purposes of this
subsection (c), no act or failure to act by Executive shall be considered
“willful” unless done or omitted to be done by Executive in bad faith and
without reasonable belief that Executive’s action or omission was in, or not
opposed to, the best interests of the Company.


 


d.              “Change in Control”
means the occurrence of any one of the following events:


 


i.                                          individuals
who, on March 18, 2003, constitute the Board (the “Incumbent Directors”) cease
for any reason to constitute at least a majority of the Board, provided that
any person becoming a director subsequent to March 18, 2003, whose election or
nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as a
nominee for director, without written objection to such nomination) shall be an
Incumbent Director; provided, however, that no individual
initially elected or nominated as a director of the Company as a result of an
actual election contest with respect to directors or as a result of any


 


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other actual solicitation of proxies or
consents by or on behalf of any person other than the Board shall be deemed to
be an Incumbent Director; provided, further, that if any
individual is appointed to the Board with the consent of Westar at such time as
Westar is the direct or indirect beneficial owner or has direct or indirect
control over the voting power of 40% or more of the Company Voting Securities
(as defined below), that individual shall be deemed to be an Incumbent
Director;


 


ii.                                       any
“person” (as such term is defined in Section 3(a)(9) of the Securities
Exchange Act of 1934 (the “Exchange Act”) and as used in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than 40% of the combined voting
power of the Company’s then outstanding securities eligible to vote for the
election of the Board (the “Company Voting Securities”); provided, however,
that the event described in this paragraph (ii) shall not be deemed to be
a Change in Control if such beneficial owner is any of the following or becomes
a beneficial owner as a result of any of the following, except as provided in
paragraph (v):  (A) Westar or any
of its subsidiaries, (B) any employee benefit plan (or related trust)
sponsored or maintained by the Company, Westar or any of their subsidiaries,
(C) any underwriter temporarily


 


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holding securities pursuant to an offering of
such securities, (D) a person involved in a Non-Qualifying Transaction (as
defined in paragraph (iii)), (E) an entity (x) controlled by the
Executive or a group of persons consisting, at the time of such acquisitions,
of the Executive and other employees of the Company or (y) of which the
majority of common equity securities, at the time of such acquisitions, is owned
by the Executive or a group of persons consisting of the Executive and other
employees of the Company or (F) any event in which Westar continues to be
directly or indirectly the beneficial owner of a greater number of shares of
the Company than that held by any other person as a result of the event
described in this paragraph (ii) or has the right to direct the vote of a
greater number of voting securities for directors (or the equivalent) of the
Company than any other person as a result of the event described in this paragraph
(ii);


 


iii.                                    the
consummation of a merger, consolidation, statutory share exchange, sale of all
or substantially all of the assets of the Company or Protection One Alarm
Monitoring, Inc., or similar form of corporate transaction (whether in one
transaction or a series of transactions) involving the Company or Protection
One Alarm Monitoring, Inc. (a “Business Combination”), unless immediately
following such Business Combination: 
(A) more than 50% of the total voting power of (x) the corporation
that owns,


 


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leases or controls all or substantially all
of the assets of the Company and of Protection One Alarm Monitoring, Inc.
resulting from such Business Combination (the “Surviving Corporation”), or
(y) if applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of 100% of the voting securities eligible
to elect directors (or the equivalent) of the Surviving Corporation (the
“Parent Corporation”), is represented by Company Voting Securities that were
outstanding immediately prior to such Business Combination (or, if applicable,
is represented by shares into which such Company Voting Securities were
converted pursuant to such Business Combination); (B) no person (other
than Westar or any employee benefit plan (or related trust) sponsored or
maintained by Westar, the Surviving Corporation or the Parent Corporation) is
or becomes the beneficial owner, directly or indirectly, of more than 40% of
the total voting power of the outstanding voting securities eligible to elect
directors (or the equivalent) of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation); and (C) at least a
majority of the members of the board of directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving Corporation) following
the consummation of the Business Combination were Incumbent Directors at the
time of the Board’s approval of the execution of the initial agreement providing
for such Business Combination


 


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(any Business Combination which satisfies all
of the criteria specified in (A), (B) and (C) above shall be deemed to be a
“Non-Qualifying Transaction”);


 


iv.                                   the
Company substantially completes a plan of complete liquidation or dissolution
whether in one transaction or a series of transactions; or


 


v.                                      Westar
becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 100% of the Company’s Voting Securities.


 


vi.                                   It
is the intent of the parties that if an event that would constitute a “Change
in Control” under this Agreement occurs at Westar or Protection One Alarm
Monitoring, Inc., a “Change in Control” shall have occurred for purposes of
this Agreement.  Upon the occurrence of
an event described in the preceding sentence, unless the context otherwise
requires, for purposes of this Agreement, Westar or Protection One Alarm
Monitoring, Inc. shall be substituted for the defined term “the Company” in the
definition of “Change in Control” together with appropriate changes to other
references in the definition of “Change in Control” to give effect to the
parties’ intent.


 


e.               “Date of Termination”
means (i) if Executive’s employment is to be terminated for Disability, 30
days after Notice of Termination is given (provided that Executive shall not
have returned to the performance of Executive’s duties on a full-


 


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time basis during such 30 day period);
(ii) if Executive’s employment is to be terminated by the Company for
Cause or by Executive for Good Reason, the date specified in the Notice of
Termination; (iii) if Executive’s employment is to be terminated by the
Company for any reason other than Cause, the date specified in the Notice of
Termination, which shall be 90 days after the Notice of Termination is given,
unless an earlier date has been expressly agreed to by Executive in writing;
(iv) if Executive’s employment terminates by reason of death, the date of
death of Executive; (v) if Executive’s employment is terminated by
Executive in a Non-Qualifying Termination, the date specified in Executive’s
Notice of Termination, but not more than 30 days after the Notice of
Termination is given, unless expressly agreed to by the Company in writing; or
(vi) in the event of a Change in Control, 180 days after the date of the
Change in Control, unless otherwise expressly agreed to by the Executive and
the Company in writing not later than 120 days after the date of the Change in
Control.


 


f.                 “Disability”
means termination of Executive’s employment by the Company due to Executive’s
absence from Executive’s duties with the Company on a full-time basis for at
least one hundred eighty (180) consecutive days as a result of Executive’s
incapacity due to physical or mental illness, unless within 30 days after
Notice of Termination is given to Executive following such absence Executive
shall have returned to the full-time performance of Executive’s duties.


 


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g.              “Good Reason” shall
mean termination based on any of the following events:


 


i.                                          any
change in the duties or responsibilities (including reporting responsibilities)
of Executive that is inconsistent in any material and adverse respect (which
may be cumulative) with Executive’s position(s), duties, responsibilities or
status with the Company (including any adverse diminution of such duties or
responsibilities), provided, however, that Good Reason shall
not be deemed to occur upon a change in duties or responsibilities (other than
reporting responsibilities) that is solely and directly due to the Company no
longer being a publicly traded entity as a result of a purchase of the
Company’s publicly traded securities by Westar even if no other event set forth
in this subsection (g) has occurred;


 


ii.                                       the
failure to reappoint or reelect Executive to any position held by Executive
without Executive’s consent; or


 


iii.                                    a
material breach of this Agreement by the Company including but not limited to
reduction in the Executive’s Annual Base Salary (as defined in Section 4(a)) or
other employment benefits.


 


Executive must provide notice of termination of employment within one
hundred eighty (180) days following Executive’s knowledge of an event or facts
constituting Good Reason (or the last of such events or facts if


 


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cumulative) or such event or facts shall not constitute Good Reason
under this Agreement.


 


h.              “Non-Qualifying
Termination” means a termination of Executive’s employment under any
circumstances not qualifying as a Qualifying Termination, including without
limitation any termination by the Company for Cause, any termination by
Executive without Good Reason or for no reason at all or any termination on
account of death, Disability or Retirement.


 


i.                  “Notice of
Termination” means a written notice of termination of employment given by one
party to the other party pursuant to Section 17(b).


 


j.                  “Qualifying
Termination” means a termination of Executive’s employment (i) by the
Company other than for Cause or (ii) by Executive for Good Reason.  Termination of Executive’s employment on
account of death, Disability or Retirement shall not be treated as a Qualifying
Termination.


 


k.               “Retirement” means
Executive’s termination of his employment on or after his attainment of age 65.


 


l.                  “Subsidiary”
means any corporation or other entity in which the Company has a direct or indirect
ownership interest of 50% or more of the total combined voting power of the
then outstanding securities or interests of such corporation or other entity
entitled to vote generally in the election of directors or in which the Company
has the


 


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right to receive 50% or more of the distribution
of profits or 50% or more of the assets upon liquidation or dissolution.


 


m.            “Westar” means Westar
Industries, Inc., a Kansas corporation, or any parent entity.


 


2.                                       Employment
and Duties.


 


a.               Term of
Employment.  The Company
agrees to employ Executive, and Executive agrees to enter into employment with
the Company, in accordance with the terms and provisions of this Agreement, for
the Term of this Agreement.  In the
event that there is a Change in Control prior to a Qualifying Termination or
Non-Qualifying Termination of Executive’s employment, Executive’s employment
under this Agreement shall terminate 180 days after the date of such Change in
Control, unless otherwise expressly agreed to in writing by the Executive and
the Company not later than 120 days after the date of the Change in
Control.  Upon termination of
Executive’s employment (regardless of whether such termination constitutes a
Qualifying Termination or Non-Qualifying Termination), Executive shall be
relieved of any obligation to continue to perform the duties described in
Section 2(b) effective as of the Date of Termination.  The termination of the employment relationship by either party
for any reason or for no reason at all shall not constitute a breach of this
Agreement, but certain obligations and benefits shall survive such termination
of employment as set forth in Section 20.


 


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b.              Duties.  During the period of Executive’s employment
under this Agreement, Executive shall serve as Chief Financial Officer and
Executive Vice President of the Company. 
Executive shall devote Executive’s full business time and attention to
the affairs of the Company and his duties as its Chief Financial Officer and
Executive Vice President.  Executive
shall have such duties as are appropriate to Executive’s position as Chief
Financial Officer and Executive Vice President, and shall have such authority
as required to enable Executive to perform these duties.  Consistent with the foregoing, Executive
shall comply with all reasonable instructions of the Board of Directors and the
Chief Executive Officer of the Company . 
Executive shall report to the Chief Executive Officer of the
Company.  Executive may continue to
reside in the State of Florida or in any location that he wishes as long as he
is able to effectively carry out the duties contemplated by this
Agreement.  During the period of Executive’s
employment under this Agreement, the Board shall cause Executive to be
nominated for election as a member of the Board of Directors of the
Company.  In addition, during the period
of Executive’s employment under this Agreement, Executive may serve as an
officer and/or director of a Subsidiary or Subsidiaries if requested to do so
by the Board.  Executive may resign from
the Board and the board of directors of any Subsidiaries at any time in his
sole and absolute discretion.


 


3.                                       Term of
Agreement.  The Term of this
Agreement shall commence on the date of this Agreement and shall continue until
the earlier of (i) the date on which Executive’s


 


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employment is
terminated by the Company or Executive in a Qualifying Termination or Non-Qualifying
Termination or (ii) 180 days after the occurrence of a Change in Control,
unless otherwise expressly agreed to by the Executive and the Company in
writing not later than 120 days after the date of the Change in Control.  Certain obligations and benefits shall
survive the expiration of the Term as set forth in Section 20.


 


4.                                       Base Salary
and Benefits.


 


a.               Base Salary.  During the period of Executive’s employment
under this Agreement, the Company shall pay Executive an annual base salary
(“Annual Base Salary”) at an annual rate equal to not less than Three Hundred
Thousand Dollars and No/100 Dollars ($300,000.00), which shall be reviewed
annually by the Compensation Committee of the Board.  Executive’s Annual Base Salary shall be paid in accordance with
the standard practices for other senior corporate executives of the Company.


 


b.              Bonuses.  Executive shall be eligible to receive
annually or otherwise any bonus awards, whether payable in cash, shares of
common stock of the Company or otherwise, which the Company, the Compensation
Committee of the Board or such other authorized committee of the Board
determines to award or grant.


 


c.               Benefit
Programs.  During the period
of Executive’s employment under this Agreement, Executive shall be eligible to
participate in all employee benefit plans and programs of the Company from time
to time in effect for the benefit of senior executives of the Company (subject
to meeting generally applicable participation


 


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requirements under the applicable plan or
program), including, but not limited to, stock option plans, restricted stock
grants, 401(k) plans, group life insurance, hospitalization and surgical and
major medical coverages, sick leave, employee stock purchase plans, car
allowances, vacations and holidays, long-term disability, and such other
benefits as are or may be made available from time to time to senior executives
of the Company.  For purposes of this
Section 4(c), the term “the Company” shall also include Protection One Alarm
Monitoring, Inc.


 


d.              Business Expenses and Perquisites.  Executive shall be reimbursed for all
reasonable expenses incurred by Executive in connection with the conduct of the
business of the Company, provided Executive properly accounts therefor in
accordance with the Company’s policies. 
During the period of Executive’s employment under this Agreement,
Executive shall also be entitled to such other perquisites as are customary for
senior executives of the Company.  The
parties hereto acknowledge that Executive’s employment will entail substantial
travel away from Executive’s residence and that Executive’s reimbursable
business expenses will include reasonable travel expenses, including without
limitation reasonable costs of air travel (including use of American Airlines
AAirpass or equivalent), weekly travel to and from Florida, parking, rental
cars, and hotel accommodations incurred in travel to and from his residence and
other travel associated with the performance of his duties hereunder.  If it is determined by the Company that any
portion of the Company’s


 


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reimbursement of the travel expenses
described in the preceding sentence constitutes taxable wages for federal
income and/or employment tax purposes, the Company agrees to pay Executive an
additional amount (the “Gross-Up Payment”) such that the net amount retained by
Executive from the amount of the travel expenses reimbursed pursuant to the
preceding sentence (the “Travel Reimbursement”) and the Gross-Up Payment, after
reduction for any federal, state and local income and employment taxes on the
Travel Reimbursement and the Gross-Up Payment, shall equal the Travel Reimbursement.  For purposes of determining the Gross-Up
Payment, Executive shall be deemed to pay Federal income taxes at the highest
marginal rate of Federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation to which such payment could be subject based upon the
state and locality of Executive’s residence or employment, net of the maximum
deduction in Federal income taxes which could be obtained from deducting such
state and local taxes.  The Company
shall make a determination of the amount of any employment taxes required on
the Gross-Up Payment.


 


e.               Office and
Services Furnished, Car. 
During the period of Executive’s employment under this Agreement, the
Company shall make available to Executive office space at the Company’s headquarters
(which is currently located in Topeka, Kansas, but which may be relocated at
the discretion of the Company), to the extent


 


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needed while he is at the Company’s
headquarters, secretarial assistance and such other facilities and services as
shall be suitable to Executive’s position and adequate for the performance of
Executive’s duties hereunder.  During
the period of Executive’s employment under this Agreement, the Company shall install
and maintain, at its expense, a broadband (cable modem or DSL) connection at
his home for the use of Executive in connection with the performance of his
duties hereunder.  Executive shall not
be required to be in the Company’s headquarters except as he may determine
necessary for him to effectively carry out the duties contemplated by this Agreement.  In addition, the Company will make available
to Executive temporary use of a Company or rental car for periods while he is
working in the Company’s headquarters.


 


5.                                       Change in
Control.  Upon the occurrence
of a Change in Control:


 


a.               the Company shall
pay to Executive a lump-sum cash payment equal to the sum of (A) Executive’s
Annual Base Salary payable through the date of the Change in Control; (B) bonus
amounts payable to Executive for prior fiscal years; (C) bonus amounts not paid
to Executive as a result of Executive’s election to defer payment; (D) a pro rata
portion of Executive’s annual bonus for the fiscal year in which the Change in
Control occurs in an amount at least equal to (1) Executive’s Bonus Amount
multiplied by a fraction, the numerator of which is the number of days in the
fiscal year in which the Change in Control occurs through the date of the
Change in Control and the denominator of which is three hundred sixty-five
(365), and reduced by (2) any


 


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amounts paid to Executive from the Company’s
annual incentive plan for the fiscal year in which the Cha7nge in Control
occurs; and (E) the cash equivalent of any accrued Paid Time Off; in each case
to the extent not already paid;


 


b.              the Company shall
pay to Executive a lump-sum cash payment equal to the sum of (i) 2.99 times the
Executive’s highest Annual Base Salary during the 12-month period immediately
prior to the date of the Change in Control, plus (ii) 2.99 times Executive’s
Bonus Amount;


 


c.               the Company shall
continue, for a period of three (3) years following the earlier of Executive’s
Date of Termination and the date that is 180 days after the date of the Change
in Control  (the “Change in Control
Termination Date”), to provide Executive (and Executive’s dependents, if
applicable) with substantially similar levels of medical, dental, and life insurance
benefits upon substantially similar terms and conditions as Executive would
have been entitled to receive if he had continued in employment; provided,
that,
if Executive cannot continue to participate in the Company plans providing such
benefits, the Company shall otherwise provide, at the Company’s option, (i)
such benefits on a substantially similar basis as if continued participation
had been permitted through one or more new plans (the “Continued Benefit
Plans”) or (ii) a lump-sum cash payment based on the cost of premiums comparable
to those that would be required to receive such benefits on a substantially
similar basis plus the amount of any conversion fees required to convert from
group


 


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coverage to individual coverage under the
Company’s existing benefit plans (the “Benefits Lump-Sum Payment”).  If the Company elects to provide the
Executive with Continued Benefit Plans, the Executive shall cooperate with the
Company and each provider of any such Continued Benefit Plan in order for the
Company to obtain such Continued Benefit Plans for Executive, which cooperation
shall include but not be limited to providing copies of medical records and
other information required by any provider of such Continued Benefit Plan and
undergoing one or more physical examinations. 
If the Company elects to provide the Executive with the Benefits
Lump-Sum Payment, the Company shall notify the Executive of its intention to
make this election not later than 90 days prior to the date on which
Executive’s coverage under existing benefit plans will expire, and if, within
60 days after Executive receives such notification from the Company, Executive
presents the Company with one or more benefit plans that the Executive has
obtained or intends to obtain that provide benefits on a substantially similar
basis as the benefits provided to Executive prior to the Change in Control
Termination Date (and acknowledgement from the provider of such benefit plans
that such benefit plans have been or can be obtained by the Executive on those
terms, including without limitation, at least substantially similar scope of
coverage, substantially similar deductibles and substantially similar
co-payments), then the Benefits Lump-Sum Payment shall be made based on the
premiums plus any other administrative fees (except co-payments) charged by the


 


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company offering such plans.  If the Company elects to provide the
Executive with the Benefits Lump-Sum Payment and it is determined by the Company
that any portion of the Benefits Lump-Sum Payment constitutes taxable wages for
federal income and/or employment tax purposes, the Company agrees to pay
Executive an additional amount (the “Benefits Gross-Up Payment”) such that the
net amount retained by Executive from the Benefits Lump-Sum Payment and the
Benefits Gross-Up Payment, after reduction for any federal, state and local
income and employment taxes on the Benefits Lump-Sum Payment and the Benefits
Gross-Up Payment, shall equal the Benefits Lump-Sum Payment.  Notwithstanding the foregoing, in the event
Executive becomes reemployed with another employer and becomes eligible to
receive benefits from such employer, the benefits described herein shall be
secondary to such benefits during the period of Executive’s eligibility, but
only to the extent that the Company reimburses Executive for any increased cost
and provides any additional benefits necessary to give Executive the benefits
provided hereunder; and


 


d.              all outstanding
stock options, restricted stock and other equity based awards (collectively,
“Awards”) shall fully vest, all restrictions on such Awards shall lapse and the
maximum level of achievement of all performance criteria with respect to such
Awards shall be deemed fully satisfied. 
In the case of stock options or any other equity based Awards in the
nature of a right that may be exercised, such stock


 


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options and other equity based Awards shall
remain exercisable for three years after the date of the Change in Control.


 


6.                                       Payments
Upon Termination of Employment.


 


a.               Qualifying
Termination.  If the
employment of Executive terminates pursuant to a Qualifying Termination, then:


 


i.                                          within
five (5) business days following the Date of Termination, the Company shall pay
to Executive a lump-sum cash payment equal to the sum of (A) Executive’s Annual
Base Salary payable through the Date of Termination; (B) bonus amounts payable
to Executive for prior fiscal years; (C) bonus amounts not paid to Executive as
a result of Executive’s election to defer payment; (D) a pro rata portion of
Executive’s annual bonus for the fiscal year in which the Date of Termination
occurs in an amount at least equal to (1) Executive’s Bonus Amount multiplied by
a fraction, the numerator of which is the number of days in the fiscal year in
which the Date of Termination occurs through the Date of Termination and the
denominator of which is three hundred sixty-five (365), and reduced by (2) any
amounts paid to Executive from the Company’s annual incentive plan for the
fiscal year in which the Date of Termination occurs; and (E) the cash
equivalent of any accrued Paid Time Off; in each case to the extent not already
paid;


 


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ii.                                       within
five (5) business days following the Date of Termination, the Company shall pay
to Executive a lump-sum cash payment equal to the sum of (i) 2.0 times the
Executive’s highest Annual Base Salary during the 12-month period immediately prior
to the Date of Termination, plus (ii) 2.0 times Executive’s Bonus Amount; provided,
however, if on or prior to the date that a Notice of Termination is
given to Executive pursuant to a Qualifying Termination there has been
stockholder approval of a Change in Control and if such Change in Control is
consummated within 100 days after the date such Notice of Termination is given,
the Company shall pay the Executive an additional lump-sum cash payment equal
to (x) .99 times the Executive’s highest Annual Base Salary during the 12-month
period immediately prior to the Date of Termination plus (y) .99 times
Executive’s Bonus Amount;


 


iii.                                    the
Company shall continue, for a period of two (2) years following Executive’s
Date of Termination (or a period of three (3) years if on or prior to the date
that a Notice of Termination is given to Executive pursuant to a Qualifying
Termination there has been stockholder approval of a Change in Control and if
such Change in Control is consummated within 100 days after the date such
Notice of Termination is given), to provide Executive (and Executive’s
dependents, if applicable) with substantially similar levels of medical,
dental, and life insurance benefits upon substantially similar terms


 


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and conditions as Executive would have been
entitled to receive if he had continued in employment; provided, that,
if Executive cannot continue to participate in the Company plans providing such
benefits, the Company shall otherwise provide, at the Company’s option, (i)
such benefits on a substantially similar basis as if continued participation
had been permitted through Continued Benefit Plans or (ii) a Benefits Lump-Sum
Payment.  If the Company elects to
provide the Executive with Continued Benefit Plans, the Executive shall
cooperate with the Company and each provider of any such Continued Benefit Plan
in order for the Company to obtain such Continued Benefit Plans for Executive,
which cooperation shall include but not be limited to providing copies of
medical records and other information required by any provider of such
Continued Benefit Plan and undergoing one or more physical examinations.  If the Company elects to provide the
Executive with the Benefits Lump-Sum Payment, the Company shall notify the
Executive of its intention to make this election not later than 90 days prior
to the date on which Executive’s coverage under existing benefit plans will
expire, and if, within 60 days after Executive receives such notification from
the Company, Executive presents the Company with one or more benefit plans that
the Executive has obtained or intends to obtain that provide benefits on a
substantially similar basis as the benefits provided to Executive prior to the
Date of Termination


 


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(and acknowledgement from the provider of
such benefit plans that such benefit plans have been or can be obtained by the
Executive on those terms, including without limitation, at least substantially
similar scope of coverage, substantially similar deductibles and substantially
similar co-payments), then the Benefits Lump-Sum Payment shall be made based on
the premiums plus any other administrative fees (except co-payments) charged by
the company offering such plans.  If the
Company elects to provide the Executive with the Benefits Lump-Sum Payment and
it is determined by the Company that any portion of the Benefits Lump-Sum
Payment constitutes taxable wages for federal income and/or employment tax purposes,
the Company agrees to pay Executive a Benefits Gross-Up Payment such that the
net amount retained by Executive from the Benefits Lump-Sum Payment and the
Benefits Gross-Up Payment, after reduction for any federal, state and local
income and employment taxes on the Benefits Lump-Sum Payment and the Benefits
Gross-Up Payment, shall equal the Benefits Lump-Sum Payment.  Notwithstanding the foregoing, in the event
Executive becomes reemployed with another employer and becomes eligible to
receive benefits from such employer, the benefits described herein shall be
secondary to such benefits during the period of Executive’s eligibility, but
only to the extent that the Company reimburses


 


23

















 


Executive for any increased cost and provides
any additional benefits necessary to give Executive the benefits provided
hereunder; and


 


iv.                                   all
outstanding Awards shall fully vest, all restrictions on such Awards shall
lapse and the maximum level of achievement of all performance criteria with
respect to such Awards shall be deemed fully satisfied.  In the case of stock options or any other
equity based Awards in the nature of a right that may be exercised, such stock
options and other equity based Awards shall remain exercisable for three years
after the Date of Termination; provided, however, that Executive shall
not be entitled to receive payments or benefits under Section 6(a)(i)(D),
6(a)(ii) or 6(a)(iii) to the extent Executive has received or is entitled to
receive payments or benefits under Section 5 of this Agreement.


 


b.              Non-Qualifying Termination.  If the employment of Executive terminates
pursuant to a Non-Qualifying Termination, then the Company shall pay to
Executive within five (5) business days following the Date of Termination, a
lump-sum cash payment equal to the sum of (1) Executive’s Annual Base
Salary payable through the Date of Termination; (2) bonus amounts earned by
Executive and declared and approved by the Board; and (3) the cash
equivalent of any accrued Paid Time Off; in each case to the extent not already
paid.  The Company may make such
additional


 


24

















 


payments and provide such additional benefits
to Executive as the Company and Executive may agree in writing.


 


7.                                       Excise
Tax.  In the event that any
amount or benefit paid or distributed to Executive pursuant to this Agreement,
taken together with any amounts or benefits otherwise paid or distributed to
Executive (collectively, the “Covered Payments”), are or become subject to the
excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended (the “Code”), or any similar tax that may hereafter by imposed (“Excise
Tax”), then the Company agrees to pay the Executive an additional amount (the “Termination
Gross Up Amount”) such that the amount retained by the Executive pursuant to
Section 5, 6(a) or 6(b), as applicable, shall equal or exceed the amount of the
Covered Payments.


 


8.                                       Non-Competition.  Executive hereby acknowledges that the services
which he will perform for the Company are of a special and unique nature, and
that the Company would find it extremely difficult or impossible to replace
Executive.  Accordingly, Executive
agrees that, in consideration of this Agreement and the payments to be received
by him hereunder, from and after the date hereof through the period during
which Executive continues to be employed by the Company and following
termination of Executive’s employment for any reason until the later of (i) the
second anniversary of such termination of employment or (ii) the last day
through which Annual Base Salary is payable to Executive pursuant to Section
5(a), 6(a)(i) or 6(b)(i), whichever is applicable (the “Non-Competition
Period”), Executive shall not, directly or indirectly, own, manage, operate,
join, control or participate in the


 


25

















 


ownership,
management, operation or control of, or be connected as a director, officer,
employee, partner, lender, consultant or otherwise (“Participate” or a
“Participation”) with any Competitor (as hereinafter defined), except with the
Company’s prior written consent.  For
purposes of this Agreement, the term “Competitor” shall mean any entity engaged
in the business of providing property monitoring services with revenue in
excess of Two Hundred Million Dollars ($200,000,000) during the most recent
twelve (12) month period for which financial statements are available,
including without limitation ADT Security Services, Brinks Home Security, Inc.,
Honeywell Inc. and their respective subsidiaries, affiliates and
successors.  Nothing in this section
shall prohibit Executive from owning for investment purposes an aggregate of up
to 3% of the publicly traded securities of any corporation listed on the New
York Stock Exchange or American Stock Exchange or whose securities are quoted
on the NASDAQ National Market.  Notwithstanding
anything which may be to the contrary herein, (i) Executive shall not be
required to cease Participation in any business or organization which begins to
compete with the Company subsequent to the time Executive commences such
Participation, provided that such business or organization began to compete
with the Company through no action, assistance, or plan of Executive, (ii)
Executive may continue to serve as a member of the Board of Directors of
Guardian International, Inc. and may continue to hold shares in Guardian
International, Inc., and (iii) following termination of Executive’s employment
with the Company for any reason, none of the restrictions in this


 


26

















 


Section 8
shall apply to Executive’s Participation in any capacity with Guardian
International, Inc.


 


It is the
desire and intent of the parties that the provisions of this Section 8 shall be
enforced under the laws and public policies applied in each jurisdiction in
which enforcement is sought. 
Accordingly, if any particular provision of this Section 8 is
adjudicated to be invalid or unenforceable or shall for any reason be held to
be excessively broad as to duration, geographic scope, activity or subject, it
shall be construed by limiting and reducing it, so as to be enforceable to the
extent compatible with applicable law and such provision shall be deemed modified
and amended to the extent necessary to render such provision enforceable in
such jurisdiction.


 


If Executive
challenges the enforceability of the provisions of this Section 8 in whole or
in part as to any Competitors, Executive shall, immediately upon such
challenge, forfeit any right to any payments and benefits under Section 5 or
6(a) that he has not already received.


 


9.                                       Confidential
Information.  Executive
acknowledges that:  (i) the
business of the Company and its Subsidiaries and affiliates is intensely competitive
and that Executive’s engagement by the Company requires that Executive have
access to and knowledge of confidential information of the Company and its
Subsidiaries and affiliates, including, but not limited to, the identity of
customers, the identity of the representatives of customers with whom the
Company and its Subsidiaries and affiliates have dealt, the kinds of services
provided by the Company and its Subsidiaries and affiliates to customers and
offered to be


 


27

















 


performed for
potential customers, the manner in which such services are performed or offered
to be performed, the service needs of actual or prospective customers, pricing
information, information concerning the creation, acquisition or disposition of
products and services, customer maintenance listings, computer software
applications and other programs, personnel information and other trade secrets
(the “Confidential Information”); (ii) the direct or indirect disclosure
of such Confidential Information to existing or potential competitors of the Company
and its Subsidiaries and affiliates would place the Company and its
Subsidiaries and affiliates at a competitive disadvantage and would do damage,
monetary or otherwise, to the business of the Company and its Subsidiaries and
affiliates; and (iii) the engaging by Executive in any of the activities
prohibited by this Section 9 may constitute improper appropriation and/or
use of such information and trade secrets. 
Notwithstanding the foregoing, Confidential Information shall not
include information which (x) is or becomes part of the public domain
through a source other than Executive, (y) is or becomes available to
Executive from a source independent of the Company and its Subsidiaries and
affiliates, or (z) constitutes general industry knowledge possessed by
Executive by virtue of Executive’s employment with the Company.  Executive expressly acknowledges the trade
secret status of the Confidential Information and that the Confidential
Information constitutes a protectable business interest of the Company and its
Subsidiaries and affiliates.  Accordingly,
the Company and Executive agree as follows:


 


28

















 


a.               During the
Non-Competition Period, Executive shall not, directly or indirectly, whether
individually, as a director, stockholder, owner, partner, employee, principal
or agent of any business, or in any other capacity, make known, disclose, furnish,
make available or use any of the Confidential Information, other than in the
proper performance of the duties contemplated herein or requested by the
Company, or as required by law or by a court of competent jurisdiction or other
administrative or legislative body; provided, however, that prior to disclosing
any of the Confidential Information to a court or other administrative or
legislative body, Executive shall promptly notify the Company so that the
Company may seek a protective order or other appropriate remedy.  The provisions of this subsection (a)
do not apply to Executive’s Participation (as defined in Section 8) in any
capacity with Guardian International, Inc.


 


b.              Executive agrees to
return all computer hardware and all Confidential Information, including all
photocopies, extracts and summaries thereof, and any such information stored
electronically on tapes, computer disks or in any other manner to the Company
at any time upon request of the Chairman of the Board of the Company and upon
the termination of Executive’s employment for any reason.


 


10.                                 Nonsolicitation.  During the Non-Competition Period, Executive
shall not, directly or indirectly, solicit, interfere with, hire, offer to hire
or induce any person who is an employee of the Company or any of its Subsidiaries
or affiliates and whose salary is in excess


 


29

















 


of $50,000 to
discontinue his or her relationship with the Company or any of its Subsidiaries
or affiliates and accept employment by, or enter into a business relationship with,
Executive or any other person or entity; provided, however, that this provision
shall not apply to (i) solicitation of any person who was an employee of
Guardian International, Inc. as of the date of the Prior Employment Agreement
and who becomes an employee of the Company or any of its Subsidiaries or
affiliates during the period of Executive’s employment with the Company or any
of its Subsidiaries or affiliates and (ii) solicitation by general advertising.


 


11.                                 Antidisparagement.


 


a.               Unless otherwise
required by a court of competent jurisdiction, pursuant to any recognized
subpoena power or by any applicable law, rule or regulation, Executive agrees
and promises that Executive shall not make any oral or written statements or
reveal any information to any person, company or agency which (i) is
materially negative, disparaging or damaging to the name, reputation or
business of the Company or any of its Subsidiaries or affiliates, or any of
their shareholders, directors, officers or employees, or (ii) has or would
have a materially negative financial impact, whether directly or indirectly, on
the Company or any of its Subsidiaries and affiliates, or any of their
shareholders, directors, officers or employees; provided that this subsection (ii)
shall not be deemed to have been violated by statements or releases of
information by Executive during the period of his employment under this
Agreement which Executive


 


30

















 


believes to be truthful and which are made in
the performance of his duties under this Agreement.


 


b.              Unless otherwise
required by a court of competent jurisdiction, pursuant to any recognized
subpoena power or by any applicable law, rule or regulation, the Company agrees
and promises that neither it nor any of its Subsidiaries and affiliates shall
make any oral or written statements or reveal any information to any person, company
or agency which (i) is materially negative, disparaging or damaging to the
name, reputation or business of Executive or (ii) has or would have a
negative financial impact, whether directly or indirectly, on Executive.


 


12.                                 Injunctive Relief.


 


a.               Executive
acknowledges that a breach of the undertakings in Sections 8, 9, 10, or
11(a) of this Agreement would cause irreparable damage to the Company and its
Subsidiaries and affiliates, the exact amount of which shall be difficult to
ascertain, and that remedies at law for any such breach would be
inadequate.  Executive agrees that, if Executive
breaches or attempts or threatens to breach any of the undertakings in
Sections 8, 9, 10, or 11(a) of this Agreement, then the Company shall be
entitled to injunctive relief without posting bond or other security, in
addition to any other remedy or remedies available to the Company at law or in
equity.


 


b.              The Company
acknowledges that a breach of the undertakings in Section 11(b) of this
Agreement would cause irreparable damage to Executive, the


 


31

















 


exact amount of which shall be difficult to
ascertain, and that remedies at law for any such breach would be
inadequate.  The Company agrees that, if
the Company or any of its Subsidiaries or affiliates breaches or attempts or
threatens to breach any of the undertakings in Section 11(b) of this Agreement,
then Executive shall be entitled to injunctive relief, without posting bond or
other security, in addition to any other remedy or remedies available to
Executive at law or in equity.


 


13.                                 Withholding Taxes.  The Company may withhold from all payments
due to Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.  Executive has represented
that he is and will continue to be a resident of the State of Florida for all
purposes.


 


14.                                 Directors and Officers Insurance;
Indemnity.  The Company shall
take all steps necessary to ensure that Executive is covered under any directors
and officers liability insurance policy in effect from time to time for current
and former directors and officers of the Company.  In addition, the Company shall hold harmless and indemnify
Executive against any and all expenses (including attorneys’ fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
Executive in connection with any threatened, pending, or completed action,
suit, or proceeding whether civil, criminal, administrative, or investigative
(including an action by or in the right of the corporation) to which Executive
is, was, or at any time becomes a party, or is threatened to be made a party,
by reason of the fact that Executive is, was, or at any time becomes a
director, officer, employee, or agent of the Company, or is,


 


32

















 


or was
serving, or at any time serves at the request of the Company as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise; or otherwise to the fullest extent as may be
provided to Executive by the Company under the provisions of the Bylaws and the
Articles of Incorporation of the Company and Delaware law.


 


15.                                 Scope of Agreement.  Nothing in this Agreement shall be deemed to
entitle Executive to continued employment with the Company or its Subsidiaries
or shall require Executive to continue the employment relationship against his
wishes; provided,
however,
that any termination of Executive’s employment during the Term of this
Agreement shall be subject to all of the provisions of this Agreement as
provided in Section 20.


 


16.                                 Successors; Binding Agreement.


 


a.               This Agreement
shall inure to the benefit of and be legally binding upon all successors and
assigns of the Company.  The Company
will require a successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. 
For purposes of this Section 16(a), “Company” shall mean the Company as
defined above and all successors to its business or assets that execute and
deliver the agreement provided for


 


33

















 


in this Section 16(a) or that otherwise
become bound by the terms and provisions of this Agreement by operation of law.


 


b.              This Agreement shall
inure to the benefit of and be enforceable by Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.  If Executive
shall die while any amounts would be payable to Executive hereunder had
Executive continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to such
person or persons appointed in writing by Executive to receive such amounts or,
if no person is so appointed, to Executive’s estate.


 


17.                                 Notice.


 


a.               For purposes of
this Agreement, all notices and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given when
delivered or five (5) days after deposit in the United States mail, certified
and return receipt requested, postage prepaid, addressed as follows:


 


If to the Executive:


 


Darius G. Nevin


1410 Palancia Avenue


Coral Gables, Florida 33146


 


If to the Company:


 


Protection One, Inc.


818 S. Kansas Avenue


Topeka, Kansas 66612


Attention:  General Counsel


 


34

















 


or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.


 


b.                                      A written notice
of Executive’s Date of Termination by the Company or Executive, as the case may
be, to the other, shall (i) indicate the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under the provision so indicated, and
(iii) specify the Date of Termination. 
The failure by Executive or the Company to set forth in such notice any
fact or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of Executive or the Company hereunder or preclude
Executive or the Company from asserting such fact or circumstance in enforcing
Executive’s or the Company’s rights hereunder.


 


18.                                 Full Settlement; Resolution of Disputes.  The Company’s obligation to make any payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall be in lieu and in full settlement of all other severance
payments to Executive under any other severance or employment agreement between
Executive and the Company, and any severance plan of the Company.  In no event shall Executive be obligated to
seek other employment or take other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and except
as otherwise provided in


 


35

















 


Section
6(a)(iii), such amounts shall not be reduced whether or not Executive obtains
other employment.  Any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in Wilmington, Delaware by three arbitrators in accordance
with the rules of the American Arbitration Association then in effect.  Judgment may be entered on the arbitrators’
award in any court having jurisdiction. 
The arbitrators shall determine the allocation of the costs and expenses
arising in connection with any arbitration proceeding pursuant to this Section
based on the arbitrators’ assessment of the merits of the positions of the
parties.


 


19.                                 Employment with Subsidiaries.  Employment with the Company for purposes of
this Agreement shall include employment with any Subsidiary.


 


20.                                 Survival.  The respective obligations and benefits
afforded to the Company and Executive as provided in Sections 1, 5, 6, 7,
8, 9, 10, 11, 12, 13, 14, 18, 21 and 23 shall survive the termination of this
Agreement.


 


21.                                 GOVERNING LAW; VALIDITY.  THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
THE PRINCIPLE OF CONFLICTS OF LAWS.  THE
INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT SHALL NOT
AFFECT THE VALIDITY


 


36

















 


OR
ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS
SHALL REMAIN IN FULL FORCE AND EFFECT.


 


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


 


23.                                 Miscellaneous.  No provision of this Agreement may be modified
or waived unless such modification or waiver is agreed to in writing and signed
by Executive and by a duly authorized officer of the Company.  No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. 
Failure by Executive or the Company to insist upon strict compliance
with any provision of this Agreement or to assert any right Executive or the
Company may have hereunder, including without limitation, the right of
Executive to terminate employment for Good Reason, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.  Except as otherwise
specifically provided herein, the rights of, and benefits payable to,
Executive, his estate or his beneficiaries pursuant to this Agreement are in addition
to any rights of, or benefits payable to, Executive, his estate or his beneficiaries
under any other employee benefit plan or compensation program of the Company.


 


37

















 


24.                                 Entire Agreement.  This Agreement constitutes the entire
agreement of the parties with respect to its subject matter and supersedes and
replaces all previous verbal or written agreements that the parties may have
made, including the Prior Employment Agreement.


 


 


[Remainder of page intentionally left
blank.  Signatures on next page.]


 


38

















 


IN WITNESS
WHEREOF, the Company has caused this Agreement to be executed by a duly
authorized officer of the Company and Executive has executed this Agreement as
of the day and year first above written.


 


	
   

  	
  PROTECTION ONE, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald A. Johnston

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Darius G. Nevin

  	
   

  
	
   

  	
  Darius G. Nevin

  	
   

  



 


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