Exhibit
10.1


EMPLOYMENT AGREEMENT


THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered
into as of the 8th day of March, 2007, by and between Protection One, Inc., a
Delaware corporation (the “Company”), Protection One Alarm Monitoring, Inc., a
Delaware corporation (“POAMI”), and Kimberly G. Lessner (“Executive”).


W I T N E
S S E T H :


WHEREAS, the Board (as defined in Section 1) has
determined that it is in the best interest of the Company, its creditors and
its stockholders to employ Executive and to provide Executive compensation and
benefits arrangements which are competitive with those of other comparable and
similarly situated corporations; and


WHEREAS, POAMI is a direct and wholly owned subsidiary
of the Company and will receive substantial direct and indirect value from
Executive; and


WHEREAS, each of the board of directors of the Company
and of POAMI has authorized the Company and POAMI, respectively, to enter into
this Agreement.


NOW, THEREFORE, for and in consideration of the
premises and the mutual covenants and agreements herein contained, the Company,
POAMI 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:


(A)   for a Date of Termination
occurring in fiscal year 2008, the annual incentive bonuses payable by the
Company to or for the benefit of or deferred by Executive for the 2007 fiscal
year of the Company; and


(B)    for a Date of Termination
occurring in fiscal year 2009, the average of the annual incentive bonuses
payable by the Company to or for the benefit of or deferred by Executive for
the 2007 and 2008 fiscal years of the Company; and


(C)    for a Date of Termination
occurring after fiscal year 2009, 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.


(c)   “Cause” means:


(A)   the willful and continued
failure of Executive to perform substantially her 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 is delivered to Executive by the Chairman of the Board, the
Chairman of the Compensation Committee or the Chief Executive Officer, which
specifically identifies the manner in which Executive has not substantially
performed Executive’s duties and that such failure if not remedied constitutes “Cause”
under this Agreement; or


(B)    Executive’s conviction by a
court of law, Executive’s admission in a legal proceeding that she is guilty or
Executive’s plea of nolo contendre,
in each case, with respect to a felony.


For purposes of this Section 1(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)   “Date of Termination” means:


(A)    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-time basis during such 30 day period);


(B)     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;


(C)     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;


(D)    if Executive’s employment
terminates by reason of death, the date of death of Executive; or


(E)     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.


(e)   “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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(f)    “Good Reason” shall mean termination of
Executive’s employment by Executive based on any of the following events:


(A)   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;


(B)    the failure to reappoint or
reelect Executive to any position held by Executive without Executive’s
consent;


(C)    a material breach of this
Agreement by the Company or POAMI including but not limited to reduction in
Executive’s Annual Base Salary (as defined in Section 4(a)) or other
reduction in medical, dental, life or disability benefits (except to the extent
such reductions apply consistently to all other senior executives);


(D)   failure to offer a short-term
incentive plan each year with a target bonus of not less than 60% of Annual Base Salary and a
potential to earn at least 100% of Annual Base Salary (unless Executive
consents otherwise, to be paid no later than the end of the first calendar
quarter after the year with respect to which such bonus relates); or


(E)    the relocation by the Company
of Executive’s principal workplace location more than 50 miles from the
workplace location principally used by Executive as of the date hereof, which
the parties agree is, as of the date hereof, the Company’s facility located at
4221 West John Carpenter Freeway, Irving, Texas 75063.


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


(g)   “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.


(h)   “Notice of Termination”
means a written notice of termination of employment given by one party to the
other party pursuant to Section 15(b).


(i)    “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 



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Executive’s employment on account of death,
Disability or Retirement shall not be treated as a Qualifying Termination.


(j)    “Retirement” means
Executive’s termination of her employment on or after her attainment of age 65.


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


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.  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 18.


(b)   Duties.  During the period of Executive’s employment
under this Agreement, Executive shall serve as Executive Vice President and
Chief Marketing Officer of the Company. 
Executive shall devote Executive’s full business time and attention to
the affairs of the Company and her duties as its Executive Vice President and
Chief Marketing Officer.  Executive shall
have such duties as are appropriate to Executive’s position as Executive Vice
President and Chief Marketing Officer, 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 President and
Chief Executive Officer and Board of Directors of the Company.  Executive shall report to the President and
Chief Executive Officer.  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 of directors of any Subsidiaries at
any time in her sole and absolute discretion.


3.     Term of Agreement.  The Term of this Agreement (“Term”) shall
commence on the date of this Agreement and shall continue until the Date of
Termination that results from a Qualifying Termination or Non-Qualifying
Termination. Certain obligations and benefits shall survive the expiration of
the Term as set forth in Section 18.


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 Two Hundred Sixty-Five
Thousand and No/100 Dollars ($265,000.00), which shall be reviewed annually by
the Board or the Compensation Committee



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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 Board, the
Compensation Committee of the Board or such other authorized committee of the
Board determines to award or grant; provided,
however, that Executive shall participate under a short-term
incentive plan (subject to its terms which shall be reasonably determined by
the Board and based on targets that are reasonably attainable) each year with a
target bonus of not less than 60%
of Annual Base Salary and a potential to earn at least 100% of Annual Base Salary. 
The bonus payable to Executive, if any, under the short-term incentive
plan with respect to 2007 shall be calculated in accordance with the respective
plan and shall take into account a pro-rata
portion based on the number of days from March 8, 2007 through December 31,
2007 (i.e., 308/364).


(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 requirements under the applicable
plan or program), including, but not limited to, retention plans, stock option
plans, restricted stock grants, 401(k) plans, group life insurance,
hospitalization and surgical and major medical coverages, employee stock
purchase plans, car allowances, paid time off (“PTO”) 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 POAMI. Executive’s car allowance shall be an amount not less than
$1,128 per month and PTO shall accrue at a rate of 8.33 hours per pay period
with a maximum cumulative accrual of 300 hours.


(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 (including reasonable travel expenses), 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.


(e)   Office and Services Furnished.  During the period of Executive’s employment
under this Agreement, the Company shall make available to Executive office
space, 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.


(f)    Stock Option Plan. On the date which is
sixty (60) days after the date of this Agreement, and in accordance with
Section 5(a)(D) hereof, Company shall grant Executive options to purchase
100,000 shares of Company’s common stock, which options shall vest and be
exercisable in accordance with the Company’s 2004 Stock Option Plan and the
Option Agreement between the Company and Executive of even date herewith and
attached hereto as Annex A.



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5.     Payments Upon Termination
of Employment.


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


(A)   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)        Executive’s
Annual Base Salary payable through the Date of Termination;


(II)       bonus
amounts payable to Executive for prior fiscal years (to the extent not
previously paid);


(III)     bonus
amounts not paid to Executive as a result of Executive’s election to defer
payment;


(IV)     a
pro rata portion of Executive’s annual bonus for the fiscal year in which
the Date of Termination occurs (to the extent not previously paid) 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 a 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


(V)       the
cash equivalent of any accrued Paid Time Off; in each case to the extent not
already paid.


(B)    within five (5) business days
following the Date of Termination, the Company shall pay to Executive a cash
lump-sum equal to the sum of Executive’s highest Annual Base Salary during the
12-month period immediately prior to the Date of Termination, plus Executive’s Bonus Amount;


(C)    the Company shall continue,
for a period of one (1) year following Executive’s Date of Termination, 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 she had continued in employment; provided, that, if Executive cannot
continue to participate in the Company benefit 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 the Company’s benefit 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 coverage to individual coverage under the Company’s existing
benefit plans (the “Benefits Lump-Sum Payment”).  If the Company elects to provide Executive
with



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Continued
Benefit Plans, 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 Executive with the Benefits Lump-Sum Payment,
the Company shall notify 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 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 (and acknowledgment from the
provider of such benefit plans that such benefit plans have been or can be
obtained by 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 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 Benefit 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)   Executive’s rights with respect
to all outstanding stock options, stock appreciation rights and other equity
based awards (“Awards”) in connection with any termination of employment,
including a Qualifying Termination, shall be governed exclusively, as applicable,
by the terms of the Protection One, Inc. 2004 Stock Option Plan, the Protection
One, Inc. Stock Appreciation Rights Plan and the grant and option agreements
provided thereunder.


(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 (i) Executive’s Annual
Base Salary payable through the Date of Termination; (ii) bonus amounts
earned by Executive and declared and approved by the Board; and (iii) the
cash equivalent of any accrued Paid Time Off; in each case to the extent not
already paid.  The



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


6.     Non-Competition.  Executive hereby acknowledges that the
services which she 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 her 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 first
anniversary of such termination of employment (the “Non-Competition
Period”), Executive shall not, directly or indirectly, own, manage, operate,
join, control or participate in the 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 One Hundred Sixty Million Dollars
($160,000,000) during the most recent twelve (12) month period for which
financial statements are available, including without limitation, ADT Security
Services, Brink’s Home Security, Inc., The Stanley Works, Siemens A.G., United
Technologies, 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, 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.


It is the desire and intent of the parties that the
provisions of this Section 6 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 6 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 6 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(a) or 5(b) that she has not already
received.


7.     Confidential Information.  Executive acknowledges that:


(a)   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



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dealt, the kinds of services provided by the Company and its
Subsidiaries and affiliates to customers and offered to be 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”);


(b)   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


(c)   the engaging by Executive in any of the activities
prohibited by this Section 7 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:


(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.


(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 or
the Chief Executive Officer of the Company and upon the termination of
Executive’s employment for any reason.


8.     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 



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affiliates and whose
salary is in excess 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 solicitation by general advertising.


9.     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 her employment under
this Agreement which Executive believes to be truthful and which are made in
the performance of her 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.


10.   Injunctive Relief.


(a)   Executive acknowledges that a breach of the
undertakings in Sections 6, 7, 8 or 9(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 6, 7, 8 or 9(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 9(b) of this Agreement would cause irreparable
damage to Executive, the 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 9(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.


11.   Withholding Taxes.  The Company may withhold from all payments
due to Executive (or her 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 she is and will continue to be a resident of the State of
Texas for all purposes.



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12.   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 and any employee
professional liability insurance policy in effect from time to time for
employed professionals 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 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.


13.   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 her
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 18.


14.   Successors; Binding
Agreement.


(a)   This Agreement shall inure to the benefit of and be
legally binding upon all successors and assigns of the Company and POAMI.  The Company and POAMI 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 and/or POAMI, by agreement in form and substance satisfactory to
Executive, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company and POAMI would be required to
perform it if no such succession had taken place.  For purposes of this Section 14(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 in this
Section 14(a) or that otherwise become bound by the terms and provisions
of this Agreement by operation of law. 
For purposes of this Section 14(a), “POAMI” shall mean POAMI as
defined above and all successors to its business or assets that execute and
deliver the agreement provided for in this Section 14(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, distributes, 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.



 11
 









15.   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 Executive:                                                                                                     Kimberly
G. Lessner


If to the Company:                                                                                 Protection
One, Inc.


1035 North 3rd Street,
Suite 100


Lawrence, KS  66044


Attention: 
Chief Executive Officer


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.


16.   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 Section 5(a)(C), 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 arbitrator’s assessment of the merits of the positions of the parties.


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



 12
 









18.   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, 14, 16, 18, 19, 21, 22, 23 and 24 shall survive the termination of
this Agreement.


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


20.   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.


21.   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 to 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, her estate or her beneficiaries pursuant to this Agreement are in
addition to any rights of, or benefits payable to, Executive, her estate or her
beneficiaries under any other employee benefit plan or compensation program of
the Company.


22.   No Mitigation.  The amounts payable to Executive upon any
termination of her employment shall be considered severance pay in consideration
of past services rendered on behalf of the Company and her continued service
from the date hereof to the date she becomes entitled to such payments and
shall be the sole amount of severance pay to which Executive is entitled from
the Company and its affiliates upon termination of her employment.  Executive shall have no duty to mitigate her
damages by seeking other employment and, should Executive actually receive
compensation from any such other employment, the payments required hereunder
shall not be reduced or offset by any such other compensation.


23.     POAMI’s Obligations.  All of the obligations of the Company
hereunder shall also be direct obligations of POAMI without the need for
Executive to seek or exhaust remedies against the Company.


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 regarding the subject matter hereof.



 13
 









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


 


	
  

  	
  PROTECTION
  ONE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Darius G. Nevin

  
	
   

  	
  Its:

  	
  EVP and CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROTECTION
  ONE ALARM 

  
	
   

  	
  MONITORING,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Darius G. Nevin

  
	
   

  	
  Its:

  	
  EVP and CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kimberly G.
  Lessner

  
	
   

  	
   

  	
  Kimberly G.
  Lessner

  



 



 14















Annex A


OPTION AGREEMENT


Protection One, Inc. (the “Company”), pursuant
to its 2004 Stock Option Plan (the “Plan”), hereby grants to the
Participant Options to purchase the number of shares of Stock set forth
below.  The Options are subject to all of
the terms and conditions set forth herein as well as all of the terms and
conditions of the Plan, all of which are incorporated herein in their
entirety.  Capitalized terms not
otherwise defined herein shall have the same meaning as set forth in the Plan;
provided that (A) the terms “Permissible Distribution Event” and “Qualified
Sale” shall have the meaning set forth in the Protection One, Inc. Stock
Appreciation Rights Plan, and (B) the term “Qualifying Termination”
shall have the meaning set forth in the Employment Agreement dated March 8,
2007 between the Company and the Participant.


In the event of a conflict or inconsistency between
the terms and provisions of the Plan and the provisions of this Agreement, the
Plan shall govern and control.


	
  Participant:

  	
   

  	
  Kimberly G. Lessner

  
	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
  May 7, 2007

  
	
   

  	
   

  	
   

  
	
  Number of Shares of Stock Subject to the
  Options:

  	
   

  	
  100,000

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share:

  	
   

  	
  $                            (closing
  price on Date of Grant)

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
  Six years from the date of grant.

  
	
   

  	
   

  	
   

  
	
  Type of Option:

  	
   

  	
  The Options granted hereby are
  intended to qualify as incentive stock options ("ISOs") to
  the extent permissible under the requirements of Section 422 of the Code
  (and shall constitue nonqualifeid stock options to the extent such Options do
  not qualify as ISOs).

  
	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

  	
  Subject to the Participant’s
  continued employment through the applicable vesting date and subject to
  Section 6(g) of the Plan, Options covering one-forty-eighth (1/48th) of the total shares of Stock set forth above shall
  vest and become exercisable on
  the last day of each full calendar month following the date of grant. Notwithstanding the foregoing, all
  Options shall vest and become exercisable immediately on a Qualifying
  Termination that occurs on or after a Qualified Sale and shall remain
  exercisable until the earlier of the Expiration Date or the first anniversary
  of such termination.

  



 













 


	
  Exercise of Options

  	
   

  	
  A Participant may exercise (subject to
  Section 6(g) and other provisions of the Plan) vested Options in whole
  or in part at any time and from time to time prior to their expiration; provided
  that, notwithstanding
  anything to the contrary in Section 6(g) of the Plan, outstanding
  Options that are vested at the time of, or in connection with, a Permissible
  Distribution Event shall expire if such Options are not exercised, or
  terminated in exchange for a net payment (if any) in accordance with
  Section 7(b) of the Plan, (1) within 6 months of the date of such
  Permissible Distribution Event, if such Permissible Distribution Event is an
  event described in paragraph (i), (ii) or (iii) of
  Section 409A(a)(2)(A) of the Code, or (2) within 10 calendar
  days of such Permissible Distribution Event, if such Permissible Distribution
  Event is an event described in paragraph (v) of
  Section 409A(a)(2)(A) of the Code (provided, for the avoidance of
  doubt, that outstanding Options that are unvested at the time of a
  Permissible Distribution Event shall not expire as a result of this proviso); and provided, further,
  that regardless of when
  exercise occurs, the shares of Stock (as adjusted pursuant to the Plan) to be
  issued upon such exercise shall only be issued and delivered to the
  Participant according to the terms set forth below (and any such shares shall
  be issued and delivered according to the terms set forth below regardless of
  whether the Participant's employment with the Company has terminated, for any
  reason, prior to the date on which such shares are to be so issued and
  delivered).

  
	
   

  	
   

  	
   

  
	
  Delivery of Shares

  	
   

  	
  Any shares of Stock that a Participant has purchased
  through the exercise of Options will be issued and delivered to the
  Participant, and any net payment due to a Participant in accordance with
  Section 7(b) of the Plan shall be paid to the Participant, upon (and
  only upon) the earlier of: 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (1) 6 months after
  a Permissible Distribution Event that is described in paragraphs (i),
  (ii) or (iii) of Section 409A(2)(A) of the Code; or 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (2) 10 calendar
  days after a Permissible Distribution Event that is described in
  paragraph (v) of Section 409A(2)(A) of the Code; or 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (3) the sixth
  anniversary of the date of grant 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (the earlier of such dates, a “Payment Date”);
  provided, for the avoidance of doubt, that there may be more than one
  Payment Date in the event a Permissible Distribution Event occurs prior to
  the date that all of a Participant’s outstanding Options have vested; and provided,
  further, that shares of Stock issuable and deliverable to a
  Participant shall be subject to adjustment and substitution (but not 

  



 



 2
 









 


	
  

  	
   

  	
  accelerated delivery) as provided in Section 7
  of the Plan (and upon such issuance and delivery the Company shall also
  issue, if applicable, and deliver to the Participant all dividends or other
  distributions (including cash or securities and including, if applicable,
  merger consideration) that would have accrued on or been issued or delivered
  in respect of such shares from the date of exercise with respect thereto
  through the date of such issuance and delivery had shares been issued and
  delivered on the date of exercise); and provided, further, that
  to the extent the Participant’s right to receive Stock is converted pursuant
  to Section 7(b) of the Plan into a right to receive cash, the amount of
  cash so payable shall be credited with interest at six percent (6%) per
  annum, compounded annually, from the date such conversion is effective until
  the applicable Payment Date.

  
	
   

  	
   

  	
   

  
	
  Holding Period for Shares Issued Upon Exercise
  of ISOs

  	
   

  	
  Participant will report to the
  Company any disposition of shares purchased upon exercise of an ISO prior to
  the expiration of the holding periods specified by Section 422(a)(1) of
  the Code. If and to the extent that such disposition imposes upon the Company
  federal, state, local or other withholding tax requirements, or any such
  withholding is required to secure for the Company an otherwise available tax
  deduction, the Participant shall remit to the Company an amount sufficient to
  satisfy those requirements.

  



 


The undersigned participant acknowledges receipt of the plan
and, as an express condition to the grant of Options under this OPTION
AGREEMENT, agrees to be bound by the terms OF both the OpTION AGREEMENT and the
Plan.


	
  PROTECTION ONE,
  inc.  

  	
   

  	
  participant
  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Date:

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
							



 


 



 3