**Exhibit10.12**

**EMPLOYMENTAGREEMENT**

THIS EMPLOYMENT AGREEMENT (the “Agreement” is enteredinto as of the 23rd day of July, 2004 by and between Protection One, Inc., aDelaware corporation (the “Company”), Protection One Alarm Monitoring, Inc., aDelaware corporation, and Joseph R. Sanchez (“Executive”).

W I T N E S S E T H :

WHEREAS, POAMI and Executive agreed to employmentterms pursuant to a Change in Control Agreement dated December 13, 2000 andamended such agreement under an Amendment to Change in Control Agreement datedJune 20, 2003 and a retention bonus letter dated June 20, 2003 (such Change inControl Agreement, as amended, together with the retention bonus letter,hereinafter referred to as the “Prior Employment Agreement”); and

WHEREAS, the Board (as defined in Section 1) hasdetermined that it is in the best interest of the Company, its creditors andits stockholders to assure that the Company will have the continued dedicationof Executive during and after the period of the Company’s and POAMI’s (asdefined in Section 1) anticipated Restructuring (as defined in Section 1) ofits indebtedness and capital stock notwithstanding the possibility oroccurrence of a Change in Control (as defined in Section 1), to provideExecutive with assurance of continued employment beyond the expiration of thePrior Employment Agreement and to provide compensation and benefitsarrangements which are competitive with those of other comparable  and similarly situated corporations; and

WHEREAS, during the period of the Company’santicipated Restructuring, Executive’s continued high performance and retentionis critical to ensure that the Company maintains its value; and

WHEREAS, Executive has agreed to enter into thisAgreement because the Company has satisfied all of its obligations under thePrior Employment Agreement; and

WHEREAS, POAMI is a direct and wholly owned subsidiaryof the Company and will receive substantial direct and indirect value fromExecutive; and

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

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

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

## (a)           “Board” means the Board of Directors of theCompany, as the case may be, whether prior to or after the Restructuring.

## (b)           “Bonus Amount” means:

### (A)          fora Date of Termination occurring in fiscal year 2004, the average of the annualincentive bonuses payable by the Company to or for the benefit of or deferredby Executive for the 2002 and 2003 fiscal years of the Company; and

### (B)           fora Date of Termination occurring after fiscal year 2004, the average of theannual incentive bonuses payable by the Company to or for the benefit of ordeferred by Executive for the last three (3) completed fiscal years of theCompany immediately preceding the Date of Termination or Change in Control.

## (c)           “Cause” means:

### (A)          thewillful and continued failure of Executive to perform substantially his dutieswith the Company (other than any such failure resulting from Executive’sincapacity due to physical or mental illness or any such failure subsequent toExecutive being delivered a Notice of Termination without Cause by the Companyor Executive delivering a Notice of Termination for Good Reason to the Company)that is not remedied within 30 days after a written demand for substantialperformance is delivered to Executive by the Chairman of the Board, theChairman of the Compensation Committee or the Chief Executive Officer whichspecifically identifies the manner in which Executive has not substantially performedExecutive’s duties and that such failure if not remedied constitutes “Cause”under this Agreement, or

### (B)           Executive’sconviction by a court of law, Executive’s admission in a legal proceeding thathe is guilty or Executive’s plea of *nolocontendre*, in each case, with respect to a felony.

For purposes of this subsection (c), no act orfailure to act by Executive shall be considered “willful” unless done oromitted to be done by Executive in bad faith and without reasonable belief thatExecutive’s action or omission was in, or not opposed to, the best interests ofthe Company.

## (d)           “Change in Control” means

### (i)   the occurrence of any oneof the following events after the earlier of the date the Restructuring isconsummated or December 31, 2005:

### (A)          individualswho, as of the date the Restructuring is consummated, constitute the Board (or,in the case no Restructuring is consummated by December 31, 2005, theindividuals who constitute the Board as of such date) (the “Incumbent Directors”)cease for any reason to constitute at least a majority of the Board, provided

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### that any person becoming a directorsubsequent to the date the Restructuring is consummated (or, in the case noRestructuring is consummated by December 31, 2005, December 31, 2005), whose electionor nomination for election was approved by a vote of at least two-thirds of theIncumbent Directors then on the Board (either by a specific vote or by approvalof the proxy statement of the Company in which such person is named as anominee for director, without written objection to such nomination) or, priorto the date that a Restructuring is consummated, as elected at any time byQuadrangle Group shall be an Incumbent Director.

### (B)           any“person” (as such term is defined in Section 3(a)(9) of the SecuritiesExchange 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” (asdefined in Rule 13d-3 under the Exchange Act), directly or indirectly, ofsecurities of the Company representing more than thirty-three and one-thirdpercent (331/3%) of the combined voting powerof the Company’s then outstanding securities eligible to vote for the electionof the Board (the “Company Voting Securities”); *provided, however*, that the event described in thisparagraph (B) shall not be deemed to be a Change in Control if suchbeneficial owner is any of the following or becomes a beneficial owner as aresult of any of the following:

#### (I)            one or more Current Debt Holder or asyndicate or group in which one or more Current Debt Holders, collectively,beneficially own a majority of the Company Voting Securities beneficially ownedby such syndicate or group;

#### (II)           any employee benefit plan (or related trust)sponsored or maintained by the Company or any of its Subsidiaries or one ormore Current Debt Holder;

#### (III)         any underwriter temporarily holding securitiespursuant to an offering of such securities;

#### (IV)         a person involved in a Non-QualifyingTransaction (as defined in paragraph (C));

#### (V)           an entity (x) controlled by Executiveor a group of persons consisting, at the time of such acquisitions, ofExecutive and other employees of the Company or any of its Subsidiaries or(y) of which the majority of common equity securities, at the time of suchacquisitions, is owned by Executive or a group of persons consisting ofExecutive and other employees of the Company or any of its Subsidiaries; or

#### (VI)         any event in which a Current Debt Holdercontinues to be directly or indirectly the beneficial owner of a greater numberof shares of the Company than that held by any other person as a result of theevent described in this paragraph (B) or has the right to direct the voteof a greater number of voting

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#### securities for directors (or the equivalent) of the Company than anyother person as a result of the event described in this paragraph (B);

### (C)           theconsummation of a merger, consolidation, statutory share exchange, sale of allor substantially all of the assets of the Company or similar form of corporatetransaction (whether in one transaction or a series of transactions) involvingthe Company (a “Business Combination”), unless immediately following suchBusiness Combination:

#### (I)            more than 50% of the total voting power of(x) the corporation that owns, leases or controls all or substantially allof the assets of the Company resulting from such Business Combination (the “SurvivingCorporation”), or (y) if applicable, the ultimate parent corporation thatdirectly or indirectly has beneficial ownership of 100% of the votingsecurities eligible to elect directors (or the equivalent) of the SurvivingCorporation (the “Parent Corporation”), is represented by Company VotingSecurities that were outstanding immediately prior to such Business Combination(or, if applicable, is represented by shares into which such Company VotingSecurities were converted pursuant to such Business Combination);

#### (II)           no person (other than (a) one or moreCurrent Debt Holder, (b) any employee benefit plan (or related trust) sponsoredor maintained by one or more Current Debt Holder, the Surviving Corporation orthe Parent Corporation or (c) a syndicate or group in which one or more CurrentDebt Holders, collectively, beneficially own a majority of the total votingpower of the subject voting securities beneficially owned by such syndicate orgroup) is or becomes the beneficial owner, directly or indirectly, of more thanthirty-three and one-third percent (331/3%) of the total voting power ofthe outstanding voting securities eligible to elect directors (or theequivalent) of the Parent Corporation (or, if there is no Parent Corporation,the Surviving Corporation); and

#### (III)         at least a majority of the members of theboard of directors of the Parent Corporation (or, if there is no ParentCorporation, the Surviving Corporation) following the consummation of theBusiness Combination were Incumbent Directors at the time of the Board’sapproval of the execution of the initial agreement providing for such BusinessCombination (any Business Combination which satisfies all of the criteriaspecified in (I), (II) and (III) above shall be deemed to be a “Non-QualifyingTransaction”); or

### (D)          theCompany substantially completes a plan of complete liquidation or dissolutionwhether in one transaction or a series of transactions;

## (ii)  in connection with theRestructuring, the occurrence of any one of the following events:

### (A)          onthe date the Restructuring is consummated, any “person” (as such term isdefined in Section 3(a)(9) of the Exchange Act and as used in

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### Sections 13(d)(3)and 14(d)(2) of the Exchange Act) other than a Current Debt Holder (or asyndicate or group in which one or more Current Debt Holders, collectively,beneficially own a majority of the total voting power of the Company VotingSecurities beneficially owned by such syndicate or group) is or becomes a “beneficialowner” (as defined in Rule 13d-3 under the Exchange Act), directly orindirectly, of securities of the Company representing more than thirty-threeand one-third percent (331/3%)of the Company Voting Securities and is the largest holder of Company VotingSecurities issued in connection with the Restructuring;

### (B)           theconsummation of a Business Combination, unless immediately following suchBusiness Combination:

#### (I)            more than 50% of the total voting power of(x) the corporation that owns, leases or controls all or substantially allof the assets of the Surviving Corporation, or (y) if applicable, theParent Corporation, is represented by Company Voting Securities that wereoutstanding immediately prior to such Business Combination (or, if applicable,is represented by shares into which such Company Voting Securities wereconverted pursuant to such Business Combination);

#### (II)           no person (other than (a) one or moreCurrent Debt Holder, (b) any employee benefit plan (or related trust) sponsoredor maintained by one or more Current Debt Holder, the Surviving Corporation orthe Parent Corporation or (c) a syndicate or group in which one or more CurrentDebt Holders, collectively, beneficially own a majority of the total votingpower of the subject voting securities beneficially owned by such syndicate orgroup) is or becomes the beneficial owner, directly or indirectly, of more thanthirty-three and one-third percent (331/3%) of the total voting power ofthe outstanding voting securities eligible to elect directors (or theequivalent) of the Parent Corporation (or, if there is no Parent Corporation,the Surviving Corporation); and

#### (III)         at least a majority of the members of theboard of directors of the Parent Corporation (or, if there is no ParentCorporation, the Surviving Corporation) following the consummation of theBusiness Combination were Incumbent Directors at the time of the Board’sapproval of the execution of the initial agreement providing for such BusinessCombination; or

### (C)           theCompany substantially completes a plan of complete liquidation or dissolutionwhether in one transaction or a series of transactions.

## (iii)   the occurrence of any oneof the following events prior to the earlier of the date the Restructuring isconsummated or December 31, 2005:

### (A)          individuals who, as of the date hereof or asotherwise elected by Quadrangle Group, constitute the Board (the “IncumbentDirectors”) cease for any reason to constitute at least a majority of theBoard, provided that any person becoming a director subsequent to the datehereof, whose election or nomination for election was

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### approved by a vote of at least two-thirds of the Incumbent Directorsthen on the Board (either by a specific vote or by approval of the proxystatement of the Company in which such person is named as a nominee fordirector, without written objection to such nomination) shall be an IncumbentDirector.

### (B)           any “person” (as such term is defined inSection 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3)and 14(d)(2) of the Exchange Act) other than a Current Debt Holder (or asyndicate or group in which one or more Current Debt Holders beneficially own amajority of the debt of the Company and POAMI beneficially owned by suchsyndicate or group) is or becomes a “beneficial owner” (as defined inRule 13d-3 under the Exchange Act as if such rule applied to ownership ofdebt), directly or indirectly, of more than thirty-three and one-third (331/3%) of the total debt of the Company andPOAMI;

### (C)            any “person” (as such term is defined inSection 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3)and 14(d)(2) of the Exchange Act) other than a Current Debt Holder (or asyndicate or group in which one or more Current Debt Holders, collectively,beneficially own a majority of the total voting power of the Company VotingSecurities beneficially owned by such syndicate or group) is or becomes a “beneficialowner” (as defined in Rule 13d-3 under the Exchange Act), directly orindirectly, of securities of the Company representing more than fifty percent(50%) of the Company Voting Securities; or

### (D)          theconsummation of a Business Combination, unless immediately following suchBusiness Combination:

#### (I)            more than 50% of the total voting power of(x) the corporation that owns, leases or controls all or substantially allof the assets of the Surviving Corporation, or (y) if applicable, theParent Corporation, is represented by Company Voting Securities that wereoutstanding immediately prior to such Business Combination (or, if applicable,is represented by shares into which such Company Voting Securities wereconverted pursuant to such Business Combination);

#### (II)           no person (other than one or more CurrentDebt Holder or any employee benefit plan (or related trust) sponsored ormaintained by one or more Current Debt Holder (or a syndicate or group in whichone or more of such persons, collectively, beneficially own a majority of thetotal voting power of the subject voting securities beneficially owned by suchsyndicate or group), the Surviving Corporation or the Parent Corporation) is orbecomes the beneficial owner, directly or indirectly, of more than thirty-threeand one-third percent (331/3%) of the total voting power ofthe outstanding voting securities eligible to elect directors (or theequivalent) of the Parent Corporation (or, if there is no Parent Corporation,the Surviving Corporation); and

#### (III)         at least a majority of the members of theboard of directors of the Parent Corporation (or, if there is no ParentCorporation, the Surviving

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#### Corporation) following the consummation of the Business Combinationwere Incumbent Directors at the time of the Board’s approval of the executionof the initial agreement providing for such Business Combination.

It is the intent of the parties that if an event thatwould constitute a “Change in Control” under this Agreement occurs at POAMI, a “Changein Control” shall have occurred for the purpose of this Agreement.  Upon the occurrence of an event described inthe preceding sentence, unless the context otherwise requires, for purposes ofthis Agreement, POAMI shall be substituted for the defined term “the Company”in the definition of “Change in Control” together with appropriate changes toother references in the definition of “Change in Control” to give effect to theparties’ intent;

## (e)           “Citicorp Group” means CitibankInternational plc, any fund that is controlled by the foregoing and, asapplicable, their respective partners, members, subsidiaries and affiliates(including without limitation, any other entities controlled by or under commoncontrol with such entities), where the assets of each such partner, member,subsidiary or affiliate primarily consist of Company Voting Securities and/ordebt of the Company or POAMI.

## (f)            “Current Debt Holders” meansQuadrangle Group, Citicorp Group and MacKay Shields Group.

## (g)           “Date of Termination” means:

### (A)          ifExecutive’s employment is to be terminated for Disability, 30 days afterNotice of Termination is given (provided that Executive shall not have returnedto the performance of Executive’s duties on a full-time basis during such30 day period);

### (B)           ifExecutive’s employment is to be terminated by the Company for Cause or byExecutive for Good Reason, the date specified in the Notice of Termination;

### (C)           ifExecutive’s employment is to be terminated by the Company for any reason otherthan Cause, the date specified in the Notice of Termination, which shall be90 days after the Notice of Termination is given, unless an earlier datehas been expressly agreed to by Executive in writing;

### (D)          ifExecutive’s employment terminates by reason of death, the date of death ofExecutive; or

### (E)           ifExecutive’s employment is terminated by Executive in a Non-QualifyingTermination, the date specified in Executive’s Notice of Termination, but notmore than 30 days after the Notice of Termination is given, unlessexpressly agreed to by the Company in writing.

## (h)           “Disability” means termination ofExecutive’s employment by the Company due to Executive’s absence from Executive’sduties 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 ormental illness, unless within 30 days after Notice of Termination is givento

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## Executive following such absence Executive shall have returned to thefull-time performance of Executive’s duties.

## (i)            “Good Reason” shall mean terminationof Executive’s employment by Executive based on any of the following events:

### (A)          any change in the duties or responsibilities (including reportingresponsibilities) of Executive that is inconsistent in any material and adverserespect (which may be cumulative) with Executive’s position(s), duties,responsibilities or status with the Company (including any adverse diminutionof such duties or responsibilities), *provided,however*, that Good Reason shall not be deemed to occur upon a changein duties or responsibilities (other than reporting responsibilities) that issolely and directly due to the Company no longer being a publicly tradedentity;

### (B)           the failure to reappoint or reelect Executive to any position held by Executivewithout Executive’s consent;

### (C)           a material breach of this Agreement by the Company or POAMI including but notlimited to reduction in Executive’s Annual Base Salary (as defined inSection 4(a)) or other reduction in medical, dental, life or disabilitybenefits (except to the extent such reductions apply consistently to all othersenior executives); or

### (D)          therelocation by the Company of Executive’s principal workplace location more than50 miles from the workplace location principally used by Executive as of thedate hereof.

Executive must provide Notice of Termination ofemployment within one-hundred-eighty (180) days following Executive’s knowledgeof an event or facts constituting Good Reason (or the last of such events orfacts if cumulative) or such event or facts shall not constitute Good Reasonunder this Agreement.

## (j)            “MacKay Group” means MacKay Shields,LLC and any fund that is controlled by the foregoing and, as applicable, theirrespective partners, members, subsidiaries and affiliates (including withoutlimitation, any other entities controlled by or under common control with suchentities), where the assets of each such partner, member, subsidiary oraffiliate primarily consist of Company Voting Securities and/or debt of theCompany or POAMI.

## (k)           “Non-Qualifying Termination” means atermination of Executive’s employment under any circumstances not qualifying asa Qualifying Termination, including without limitation any termination by theCompany for Cause, any termination by Executive without Good Reason or for noreason at all or any termination on account of death, Disability or Retirement.

## (l)            “Notice of Termination” means awritten notice of termination of employment given by one party to the otherparty pursuant to Section 16(b).

## (m)           “POAMI” means Protection One AlarmMonitoring, Inc., a Delaware corporation, and its successors and assignees.

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## (n)           “Quadrangle Group” means QuadrangleGroup LLC, POI Acquisition I, Inc., POI Acquisition, LLC, Quadrangle MasterFunding Ltd., any fund that is controlled by the foregoing and, as applicable,their respective partners, members, subsidiaries and affiliates (includingwithout limitation, any other entities controlled by or under common controlwith such entities), where the assets of each such partner, member, subsidiaryor affiliate primarily consist of Company Voting Securities and/or debt of theCompany or POAMI.

## (o)           “Qualifying Termination” means atermination of Executive’s employment (i) by the Company other than forCause, including by the Company providing notice of nonrenewal of thisAgreement or (ii) by Executive for Good Reason.  Termination of Executive’s employment onaccount of death, Disability, Retirement shall not be treated as a QualifyingTermination.

## (p)           “Restructuring” means shall mean anytransaction or series of transactions that effectuates any reorganization, recapitalization,consolidation, business combination, merger, or other similar transaction orany transaction that effectuates any material amendment to, or other materialchange in, the Company’s or POAMI’s obligations or indebtedness for borrowedmoney as of the date hereof (including accrued or accreted interest thereon)excluding changes in beneficial ownership of such indebtedness, but including,without limitation, (i) any amendment or modification to the Company’srevolving credit facility, 7.375% Senior Unsecured Notes due 2005 or 8.125%Senior Subordinated Notes due 2009 or that modifies any material payment termor any material financial or operating covenant or that provides for aforbearance of any material payment obligation or material covenant, in eachcase, such that an amount that otherwise would be due and payable (according toits terms, by put, upon default and acceleration or otherwise) is delayed orotherwise extended for at least twelve months or that converts a materialamount of the Company’s or POAMI’s obligations or indebtedness for borrowedmoney as of the date hereof (including accrued or accreted interest thereon) toequity and/or to a security junior to the claim’s existing priority or isotherwise compromised, or any cash tender offer or any combination thereof; or(ii) (A) any merger, consolidation, reorganization, recapitalization, businesscombination or other transaction pursuant to which the Company is acquired by,or combined with, any person, group of persons, partnership, corporation orother entity other than a Current Debt Holder (an “Acquiror”) or (B) theacquisition, directly or indirectly by an Acquiror (or by one or more personsacting together with an Acquiror pursuant to a written agreement or otherwise),in a single transaction or a series of transactions, of (x) all or apreponderance of the assets or operations of the Company, or all or anymaterial portion of any operating division of the Company or (y) all,substantially all, or a majority of the outstanding or newly issued shares ofthe Company’s (or any of its Subsidiary’s) capital stock (or any securitiesconvertible into, or options, warrants or other rights to acquire such capitalstock); in each case, whether accomplished out-of-court or through theconfirmation of any plan of reorganization pursuant to Section 1129 of theUnited States Bankruptcy Code, whether the requisite consents were obtainedin-court or out-of-court.

## (q)           “Retirement” means Executive’stermination of his employment on or after his attainment of age 65.

## (r)            “Subsidiary” means any corporationor other entity in which the Company has a direct or indirect ownershipinterest of 50% or more of the total combined voting power of

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## the then outstanding securities or interests of such corporation orother entity entitled to vote generally in the election of directors or inwhich the Company has the right to receive 50% or more of the distribution ofprofits or 50% or more of the assets upon liquidation or dissolution.

# 2.             Employment andDuties.

## (a)           Term of Employment.  The Company agrees to employ Executive, andExecutive agrees to enter into employment with the Company, in accordance withthe terms and provisions of this Agreement, for the Term of this Agreement.  The execution of this Agreement shallconstitute acceptance by Executive and the Company that Executive’s employmentshall not terminate as a result of any Change in Control prior to the datehereof.  Upon termination of Executive’semployment (regardless of whether such termination constitutes a QualifyingTermination or Non-Qualifying Termination), Executive shall be relieved of anyobligation 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 anyreason or for no reason at all shall not constitute a breach of this Agreement,but certain obligations and benefits shall survive such termination ofemployment as set forth in Section 19.

## (b)           Duties.  During the period of Executive’s employmentunder this Agreement, Executive shall serve as Sr. Vice President CustomerOperations of the Company.  Executiveshall devote Executive’s full business time and attention to the affairs of theCompany and his duties as its Sr. Vice President Customer Operations.  Executive shall have such duties as areappropriate to Executive’s position as Sr. Vice President Customer Operations,will be responsible for planning, organizing, monitoring and directing customeroperations, ensuring that service levels, quality, productivity and financialgoals are achieved in a 24-hour environment, developing management staff tooversee day to day operations and shall have such authority as required toenable Executive to perform these duties. Consistent with the foregoing, Executive shall comply with allreasonable instructions of the Chief Executive Officer and Board of Directorsof the Company.  Executive shall reportto the Chief Executive Officer.  Inaddition, during the period of Executive’s employment under this Agreement,Executive may serve as an officer and/or director of a Subsidiary orSubsidiaries if requested to do so by the Board.  Executive may resign from the board ofdirectors of any Subsidiaries at any time in his sole and absolute discretion.

# 3.             Term of Agreement.  The Term of this Agreement shall commence onthe date of this Agreement and shall continue until the earlier of (i) thefirst anniversary of the date of this Agreement or (ii) the Date ofTermination that results from a Qualifying Termination or Non-QualifyingTermination.  If this Agreement remainsin effect through the first anniversary of the date of this Agreement, it shallthereafter be automatically extended for an indefinite number of one (1) yearperiods unless either party sends written notice to the other party of itsintention not to renew at least thirty (30) days prior to expiration of saidTerm.  If the election not to renew ismade, this Agreement shall remain in full force and effect for the remainingoriginal term and any extension periods thereafter if the original term hasbeen renewed.  The original term and anyrenewal periods thereafter are hereinafter collectively referred to as the “Term.”  Certain obligations and benefits shallsurvive the expiration of the Term as set forth in Section 19.

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# 4.     Base Salaryand Benefits.

## (a)           Base Salary.  During the period of Executive’s employmentunder this Agreement, the Company shall pay Executive an annual base salary (“AnnualBase Salary”) at an annual rate equal to not less than One Hundred Seventy FiveThousand and No/100 Dollars ($175,000.00), which shall be reviewed annually bythe Board or the Compensation Committee of the Board.  Executive’s Annual Base Salary shall be paidin accordance with the standard practices for other senior corporate executivesof the Company.

## (b)           Bonuses.  Executive shall be eligible to receiveannually or otherwise any bonus awards, whether payable in cash, shares ofcommon stock of the Company or otherwise, which the Company, the Board, theCompensation Committee of the Board or such other authorized committee of theBoard determines to award or grant; provided, however, that Executive shallparticipate under a short-term incentive plan (subject to its terms which shallbe reasonably determined by the Board and based on targets that are reasonablyattainable) each year.

## (c)           Benefit Programs.  During the period of Executive’s employmentunder this Agreement, Executive shall be eligible to participate in allemployee benefit plans and programs of the Company from time to time in effectfor the benefit of senior executives of the Company (subject to meetinggenerally applicable participation requirements under the applicable plan orprogram), including, but not limited to, retention plans, stock option plans,restricted stock grants, 401(k) plans, group life insurance, hospitalizationand surgical and major medical coverages, sick leave, employee stock purchaseplans, car allowances, vacations and holidays, long-term disability, and suchother benefits as are or may be made available from time to time to seniorexecutives of the Company.  For purposesof this Section 4(c), the term “the Company” shall also includePOAMI.   If there is a sale in anunderwritten public offering registered under the Securities Act of 1933, asamended, of Company Voting Securities having an aggregate offering value of atleast $40 million, all of Executive’s Awards (as defined below) will fullyvest, all restrictions on such Awards shall lapse and the maximum level ofachievement of all performance criteria with respect to such Awards shall bedeemed fully satisfied.  In the case ofstock options or any other equity based Awards in the nature of a right thatmay be exercised, such stock options and other equity based Awards shall remainexercisable for three years after the Date of Termination.

## (d)           Business Expenses and Perquisites.  Executive shall be reimbursed for allreasonable expenses incurred by Executive in connection with the conduct of thebusiness of the Company (including reasonable travel expenses), providedExecutive properly accounts therefor in accordance with the Company’s policies.During the period of Executive’s employment under this Agreement, Executiveshall also be entitled to such other perquisites as are customary for seniorexecutives of the Company.

## (e)           Office and Services Furnished.  During the period of Executive’s employmentunder this Agreement, the Company shall make available to Executive officespace, secretarial assistance and such other facilities and services as shallbe suitable to Executive’s position and adequate for the performance ofExecutive’s duties hereunder.

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## (f)            Retention Bonus.  Executive will receive two retention bonuseseach in an amount equal to 50% of Executive’s Annual Base Salary (with suchAnnual Base Salary to be determined as of the date such bonus is paid) (“RetentionBonus”).  The first retention bonus shallbe payable if he remains continuously employed by the Company from the datehereof through the earlier of the date of the consummation of the Restructuringor December 31, 2004 or, if prior to the consummation of the Restructuring orsuch date, as applicable, (i) he is terminated by the Company other than forCause, (ii) he resigns his employment because of Good Reason or (iii) theCompany does not renew the Agreement upon expiration of the Term.  The second retention bonus shall be payableif he remains continuously employed by the Company from the date hereof throughthe earlier of the date of the consummation of the Restructuring or December 31,2005 or, if prior to the consummation of the Restructuring or such date, asapplicable, (i) he is terminated by the Company other than for Cause, (ii) heresigns his employment because of Good Reason or (iii) the Company does notrenew the Agreement upon expiration of the Term.  Payment of any amount pursuant to thisparagraph shall not reduce any other payments or benefits to which Executive isentitled under this Agreement.  Shouldthe Chief Executive Officer of the Company agree to forgo any portion of hisRetention Bonus for any reason at any time, Executive agrees to forgo the samepercentage of his Retention Bonus.

# 5.             Payments UponTermination of Employment.

## (a)           Qualifying Termination.  If the employment of Executive terminatespursuant to a Qualifying Termination, then:

### (A)          withinfive (5) business days following the Date of Termination, the Company shall payto Executive a lump-sum cash payment equal to the sum of

#### (I)            Executive’s Annual Base Salary payablethrough the Date of Termination;

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

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

#### (IV)         a pro rata portion of Executive’s annualbonus for the fiscal year in which the Date of Termination occurs (to theextent not previously paid) in an amount at least equal to (1) Executive’sBonus Amount multiplied by a fraction, the numerator of which is the number ofdays in a fiscal year in which the Date of Termination occurs through the Dateof 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 annualincentive plan for the fiscal year in which the Date of Termination occurs; and

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

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### (B)           withinfive (5) business days following the Date of Termination, the Company shall payto Executive a cash lump-sum equal to the sum of Executive’s highest AnnualBase Salary during the 12-month period immediately prior to the Date ofTermination, *plus* Executive’sBonus Amount; provided, however, if a Notice of Termination is given by theCompany or Executive within four months prior to a Change in Control or oneyear following a Change of Control, the Company shall pay Executive anadditional lump-sum cash payment equal to (x) .99 times Executive’shighest Annual Base Salary during the 12-month period immediately prior to theDate of Termination *plus*(y) .99 times Executive’s Bonus Amount;

### (C)           theCompany shall continue, for a period of one (1) year (or two (2) years in theevent Executive is entitled to payments under Sections 5(a)(B)(x) and (y))following Executive’s Date of Termination, to provide Executive (and Executive’sdependents, if applicable) with substantially similar levels of medical,dental, and life insurance benefits upon substantially similar terms andconditions as Executive would have been entitled to receive if he had continuedin employment; *provided, that*, ifExecutive cannot continue to participate in the Company benefit plans providingsuch benefits, the Company shall otherwise provide, at the Company’s option,(i) such benefits on a substantially similar basis as if continued participationhad been permitted through the Company’s benefit plans (the “Continued BenefitPlans”) or (ii) a lump-sum cash payment based on the cost of premiumscomparable to those that would be required to receive such benefits on asubstantially similar basis plus the amount of any conversion fees required toconvert from group coverage to individual coverage under the Company’s existingbenefit plans (the “Benefits Lump-Sum Payment”).  If the Company elects to provide Executivewith Continued Benefit Plans, Executive shall cooperate with the Company andeach provider of any such Continued Benefit Plan in order for the Company toobtain such Continued Benefit Plans for Executive, which cooperation shallinclude but not be limited to providing copies of medical records and otherinformation required by any provider of such Continued Benefit Plan andundergoing one or more physical examinations. If the Company elects to provide Executive with the Benefits Lump-SumPayment, the Company shall notify Executive of its intention to make thiselection not later than 90 days prior to the date on which Executive’scoverage under existing benefit plans will expire, and if, within 60 daysafter Executive receives such notification from the Company, Executive presentsthe Company with one or more benefit plans that Executive has obtained orintends to obtain that provide benefits on a substantially similar basis as thebenefits provided to Executive prior to the Date of Termination (andacknowledgment from the provider of such benefit plans that such benefit planshave been or can be obtained by Executive on those terms, including, withoutlimitation, at least substantially similar scope of coverage, substantiallysimilar deductibles and substantially similar co-payments), then the BenefitsLump-Sum Payment shall be made based on the premiums plus any otheradministrative fees (except co-payments) charged by the Company offering suchplans.  If the Company elects to provideExecutive with the Benefits Lump-Sum Payment and it is determined by theCompany that any portion of the Benefits Lump-Sum Payment constitutes taxablewages for federal income and/or employment tax purposes, the Company agrees topay Executive an additional amount (the “Benefits Gross-Up Payment”) such thatthe net amount retained by Executive from the Benefit Lump-Sum Payment and theBenefits

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### Gross-UpPayment, after reduction for any federal, state and local income and employmenttaxes on the Benefits Lump-Sum Payment and the Benefits Gross-Up Payment, shallequal the Benefits Lump-Sum Payment. Notwithstanding the foregoing, in the event Executive becomes reemployedwith another employer and becomes eligible to receive benefits from suchemployer, the benefits described herein shall be secondary to such benefitsduring the period of Executive’s eligibility, but only to the extent that theCompany reimburses Executive for any increased cost and provides any additionalbenefits necessary to give Executive the benefits provided hereunder; and

### (D)          alloutstanding stock options, restricted stock and other equity based awards(collectively, “Awards”) shall fully vest, all restrictions on such Awardsshall lapse and the maximum level of achievement of all performance criteriawith respect to such Awards shall be deemed fully satisfied.  In the case of stock options or any otherequity based Awards in the nature of a right that may be exercised, such stockoptions and other equity based Awards shall remain exercisable for three yearsafter the Date of Termination.

## (b)           Non-Qualifying Termination.  If the employment of Executive terminatespursuant to a Non-Qualifying Termination, then the Company shall pay toExecutive within five (5) business days following the Date of Termination, alump-sum cash payment equal to the sum of (i) Executive’s Annual BaseSalary payable through the Date of Termination; (ii) bonus amounts earnedby Executive and declared and approved by the Board; and (iii) the cashequivalent of any accrued Paid Time Off; in each case to the extent not alreadypaid.  The Company may make suchadditional payments and provide such additional benefits to Executive as theCompany and Executive may agree in writing.

# 6.     Excise TaxGross Up.

## (a)           Anything in this Agreement to the contrarynotwithstanding, in the event that it shall be determined that the vesting ofAwards, aggregate payments or distributions by the Company or its affiliatedcompanies to or for the benefit of Executive, whether paid or payable ordistributed or distributable pursuant to the terms of this Agreement orotherwise but determined without regard to any additional payments requiredunder this Section 6 (a “Payment”), constitute “parachute payments” (as suchterm is defined under Section 280G of the Internal Revenue Code of 1986, asamended (the “Code”) or any successor provision, and the regulationspromulgated thereunder (collectively, “Section 280G”)) the aggregate presentvalue of which equals or exceeds three times Executive’s “base amount” (as suchterm is defined under Section 280G) and are therefore subject to the excise taximposed by Section 4999 of the Code or any successor provision (collectively, “Section4999”) or any interest, penalties or additions to tax with respect to suchexcise tax (the total excise tax, together with any interest, penalties oradditions to tax, are hereinafter collectively referred to as the “Excise Tax”)),then Executive shall be entitled to receive an additional payment (a “Gross-UpPayment”) in an amount such that after payment by Executive of all taxes(including any interest or penalties imposed with respect to such taxes),including, without limitation, any Federal, state or local income andemployment taxes and Excise Tax (and any interest and penalties imposed withrespect to any such taxes) imposed upon the Gross-Up Payment, Executive retainsan amount of the Gross-Up Payment equal to the Excise Tax imposed upon thePayments.  Notwithstanding the foregoing,

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## Executive agrees to reduce the aggregate amount of any Payments thatconstitute “parachute payments” to the extent necessary so that such Paymentsdo not equal or exceed three times Executive ‘ s “base amount”  (and therefore  are not subject to the excise tax imposed by Section 4999); provided, however,that Executive shall not be required to make any such reduction if thereduction necessary to cause such Payments not to equal or exceed three timesExecutive’s “base amount” is more than $100,000.

## (b)           Subject to the provisions of Section 6(c)hereof, all determinations required to be made under this Section 6, includingwhether and when a Gross-Up Payment is required and the amount of such Gross-UpPayment and the assumptions to be utilized in arriving at such determination,shall be made by the Company’s public accounting firm (the “Accounting Firm”)which shall provide detailed supporting calculations both to the Company andExecutive within fifteen (15) business days of the receipt of notice fromExecutive that there has been a Payment, or such earlier time as is requestedby the Company.  In the event that theAccounting Firm is serving as accountant or auditor for the individual, entityor group effecting the change in control, Executive may appoint anothernationally recognized public accounting firm to make the determinationsrequired hereunder (which accounting firm shall then be deemed to be theAccounting Firm hereunder).  All fees andexpenses of the Accounting Firm shall be borne solely by the Company. AnyGross-Up Payment, as determined pursuant to this Section 6, shall be paid by theCompany to Executive within five (5) days of the receipt of the Accounting Firm’sdetermination (it being understood, however, that the Gross Up Payment may, ifpermitted by law, be paid directly to the applicable taxing authorities).  If the Accounting Firm determines that noExcise Tax is payable by Executive, it shall furnish Executive with a writtenopinion that failure to report the Excise Tax on Executive’s applicable federalincome tax return would not result in the imposition of a negligence or similarpenalty.  Any determination by theAccounting Firm shall be binding upon the Company and Executive.  As a result of the uncertainty in theapplication of Section 4999 at the time of the initial determination by theAccounting Firm hereunder, it is possible that Gross-Up Payments which will nothave been made by the Company should have been made by the Company (“Underpayment”),or that Gross-Up Payments will have been made by the Company which should nothave been made (“Overpayment”), consistent with the calculations required to bemade hereunder.  In either such event,the Accounting Firm shall determine the amount of the Underpayment orOverpayment that has occurred.  In theevent that the Company exhausts its remedies pursuant to Section 6(c) and Executivethereafter is required to make a payment of any Excise Tax, the Accounting Firmshall determine the amount of the Underpayment that has occurred and any suchUnderpayment shall be promptly paid by the Company to or for the benefit ofExecutive.  In the case of anOverpayment, Executive shall, at the direction and expense of the Company, takesuch steps as are reasonably necessary (including, if reasonable, the filing ofreturns and claims for refund), and otherwise reasonably cooperate with the Companyto correct such Overpayment; provided, however, that (i) Executive shall not inany event be obligated to return to the Company an amount greater than the netafter-tax portion of the Overpayment that he has retained or has recovered as arefund from the applicable taxing authorities and (ii) this provision shall beinterpreted in a manner consistent with the intent of Section 6(a) hereof tomake Executive whole, on an after-tax basis, from the application of Section4999.

## (c)           Executive shall notify the Company inwriting of any claim by the Internal Revenue Service that, if successful, wouldrequire a payment by the Company, or a change in the

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## amount of the payment by the Company of, the Gross-Up Payment.  Such notification shall be given as soon as practicableafter Executive is informed in writing of such claim and shall apprise theCompany of the nature of such claim and the date on which such claim isrequested to be paid; provided that the failure to give any notice pursuant tothis Section 6(c) shall not impair Executive’s rights under this Section 6except to the extent the Company is materially prejudiced thereby.  Executive shall not pay such claim prior tothe expiration of the 30-day period following the date on which Executive givessuch notice to the Company (or such shorter period ending on the date that anypayment of taxes with respect to such claim is due).  If the Company notifies Executive in writingprior to the expiration of such period that it desires to contest such claim,Executive shall:

# (i)            give the Company anyinformation reasonably requested by the Company relating to such claim,

# (ii)           take such action inconnection with contesting such claim as the Company shall reasonably requestin writing from time to time, including, without limitation, accepting legalrepresentation with respect to such claim by an attorney reasonably selected bythe Company,

# (iii)          cooperate with theCompany in good faith in order effectively to contest such claim, and

# (iv)          permit the Company toparticipate in any proceedings relating to such claim; provided, however, thatthe Company shall bear and pay directly all costs and expenses (includingadditional interest, penalties or additions to tax) incurred in connection withsuch contest and shall indemnify and hold Executive harmless, on an after-taxbasis, for any Excise Tax or income, employment or other tax (includinginterest, penalties or additions to tax with respect thereto) imposed as aresult of such representation and payment of costs and expenses.  Without limitation on the foregoing provisionsof this Section 6(c) hereof, the Company shall control all proceedings taken inconnection with such contest and, at its sole option, may pursue or forgo anyand all administrative appeals, proceedings, hearings and conferences with thetaxing authority in respect of such claim and may, at its sole option, eitherdirect Executive to pay the tax claimed and sue for a refund or contest theclaim in any permissible manner, and Executive agrees to prosecute such contestto a determination before any administrative tribunal, in a court of initialjurisdiction and in one or more appellate courts, as the Company shalldetermine; provided further, that if the Company directs Executive to pay suchclaim and sue for a refund, the Company shall advance the amount of suchpayment to Executive on an interest-free basis and shall indemnify and holdExecutive harmless, on an after-tax basis, from any Excise Tax or income,employment or other tax (including interest, penalties or additions to tax withrespect to any such taxes) imposed with respect to such advance or with respectto any imputed income with respect to such advance; and provided further, thatany extension of the statute of limitations relating to payment of taxes forthe taxable year of Executive with respect to which such contested amount isclaimed to be due is limited solely to such contested amount.  Furthermore, the Company’s control of thecontest shall be limited to issues with respect to which a Gross-Up Paymentwould be payable hereunder and Executive shall be entitled to settle or

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# contest, as the case may be, any other issue raised bythe Internal Revenue Service or any other taxing authority.

# (d)           If, after the receiptby Executive of an amount advanced by the Company pursuant to Section 6(c)hereof, Executive becomes entitled to receive, and receives, any refund withrespect to such claim, Executive shall (subject to the Company’s complying withthe requirements of Section 6(c) hereof) promptly pay to the Company the amountof such refund (together with any interest paid or credited thereon after taxesapplicable thereto).  If, after thereceipt by Executive of an amount advanced by the Company pursuant to Section 6(c),a determination is made that Executive shall not be entitled to any refund withrespect to such claim and the Company does not notify Executive in writing ofits intent to contest such denial of refund prior to the expiration of thirty(30) days after such determination, then such advance shall be forgiven andshall not be required to be repaid and the amount of such advance shall offset,to the extent thereof, the amount of Gross-Up Payment required to be paid.

# 7.             Non-Competition.  Executive hereby acknowledges that theservices which he will perform for the Company are of a special and uniquenature, and that the Company would find it extremely difficult or impossible toreplace Executive.  Accordingly,Executive agrees that, in consideration of this Agreement and the payments tobe received by him hereunder, from and after the date hereof through the periodduring which Executive continues to be employed by the Company and followingtermination of Executive’s employment for any reason until the firstanniversary (or the second anniversary in the event Executive is entitled topayments under Sections 5(a)(B)(x) and (y)) 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 priorwritten consent.  For purposes of thisAgreement, the term “Competitor” shall mean any entity engaged in the businessof providing property monitoring services with revenue in excess of One HundredSixty Million Dollars ($160,000,000) during the most recent twelve (12) monthperiod for which financial statements are available, including withoutlimitation, ADT Security Services, Brink’s Home Security, Inc., HoneywellSecurity Monitoring, Inc. and their respective subsidiaries, affiliates andsuccessors.  Nothing in this sectionshall prohibit Executive from owning for investment purposes an aggregate of upto 3% of the publicly traded securities of any corporation listed on the NewYork Stock Exchange or American Stock Exchange or whose securities are quotedon the NASDAQ National Market. Notwithstanding anything which may be to the contrary herein, Executiveshall not be required to cease Participation in any business or organizationwhich begins to compete with the  Companysubsequent to the time Executive commences such Participation, *provided*that such business or organization began to competewith the Company through no action, assistance, or plan of Executive.

It is the desire and intent of the parties that theprovisions of this Section 7 shall be enforced under the laws and publicpolicies applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular provision ofthis Section 7 is adjudicated to be invalid or unenforceable or shall forany 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 asto be enforceable to the extent compatible with applicable law and suchprovision shall be deemed

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modified and amended tothe extent necessary to render such provision enforceable in such jurisdiction.

If Executive challenges the enforceability of theprovisions of this Section 7 in whole or in part as to any Competitors,Executive shall, immediately upon such challenge, forfeit any right to any paymentsand benefits under Section 5(a) or 5(b) that he has not already received.

# 8.             ConfidentialInformation.  Executive acknowledgesthat:

## (a)           the business of the Company and itsSubsidiaries and affiliates is intensely competitive and that Executive’s engagementby the Company requires that Executive have access to and knowledge ofconfidential information of the Company and its Subsidiaries and affiliates,including, but not limited to, the identity of customers, the identity of therepresentatives of customers with whom the Company and its Subsidiaries andaffiliates have dealt, the kinds of services provided by the Company and itsSubsidiaries and affiliates to customers and offered to be performed forpotential customers, the manner in which such services are performed or offeredto be performed, the service needs of actual or prospective customers, pricinginformation, information concerning the creation, acquisition or disposition ofproducts and services, customer maintenance listings, computer softwareapplications and other programs, personnel information and other trade secrets(the “Confidential Information”);

## (b)           the direct or indirect disclosure of suchConfidential Information to existing or potential competitors of the Companyand its Subsidiaries  and affiliateswould place the Company and its Subsidiaries and affiliates at a competitivedisadvantage and would do damage, monetary or otherwise, to the business of theCompany and its Subsidiaries and affiliates; and

## (c)           the engaging by Executive in any of theactivities prohibited by this Section 8 may constitute improperappropriation and/or use of such information and trade secrets.

Notwithstanding the foregoing, ConfidentialInformation shall not include information which (x) is or becomes part of thepublic domain through a source other than Executive, (y) is or becomesavailable to Executive from a source independent of the Company and itsSubsidiaries and affiliates, or (z) constitutes general industry knowledgepossessed by Executive by virtue of Executive’s employment with theCompany.  Executive expresslyacknowledges the trade secret status of the Confidential Information and thatthe Confidential Information constitutes a protectable business interest of theCompany and its Subsidiaries and affiliates. Accordingly, the Company and Executive agree as follows:

### (A)          Duringthe 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 orrequested by the Company, or as required by law or by a court of competentjurisdiction or other administrative or

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### legislativebody; *provided, however*, thatprior to disclosing any of the Confidential Information to a court or otheradministrative or legislative body, Executive shall promptly notify the Companyso that the Company may seek a protective order or other appropriate remedy.

### (B)           Executiveagrees to return all computer hardware and all Confidential Information,including all photocopies, extracts and summaries thereof, and any suchinformation stored electronically on tapes, computer disks or in any othermanner to the Company at any time upon request of the Chairman of the Board orthe Chief Executive Officer of the Company and upon the termination ofExecutive’s employment for any reason.

# 9.             Nonsolicitation.  During the Non-Competition Period, Executiveshall not, directly or indirectly, solicit, interfere with, hire, offer to hireor induce any person who is an employee of the Company or any of itsSubsidiaries or affiliates and whose salary is in excess of $50,000 todiscontinue his or her relationship with the Company or any of its Subsidiariesor affiliates and accept employment by, or enter into a business relationshipwith, Executive or any other person or entity; *provided,however*, that this provision shall not apply to solicitation bygeneral advertising.

# 10.           Antidisparagement.

## (a)           Unless otherwise required by a court ofcompetent jurisdiction, pursuant to any recognized subpoena power or by anyapplicable law, rule or regulation, Executive agrees and promises thatExecutive shall not make any oral or written statements or reveal anyinformation to any person, company or agency which (i) is materiallynegative, disparaging or damaging to the name, reputation or business of theCompany or any of its Subsidiaries or affiliates, or any of their shareholders,directors, officers or employees, or (ii) has or would have a materiallynegative financial impact, whether directly or indirectly, on the Company orany of its Subsidiaries and affiliates, or any of their shareholders,directors, officers or employees; *provided* thatthis subsection (ii) shall not be deemed to have been violated bystatements or releases of information by Executive during the period of hisemployment under this Agreement which Executive believes to be truthful andwhich are made in the performance of his duties under this Agreement.

## (b)           Unless otherwise required by a court ofcompetent jurisdiction, pursuant to any recognized subpoena power or by anyapplicable law, rule or regulation, the Company agrees and promises thatneither it nor any of its Subsidiaries and affiliates shall make any oral orwritten statements or reveal any information to any person, company or agencywhich (i) is materially negative, disparaging or damaging to the name,reputation or business of Executive or (ii) has or would have a negativefinancial impact whether directly or indirectly, on Executive.

# 11.           Injunctive Relief.

## (a)           Executive acknowledges that a breach of theundertakings in Sections 7, 8, 9 or 10(a) of this Agreement would causeirreparable damage to the Company and its Subsidiaries and affiliates, theexact amount of which shall be difficult to ascertain, and that

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## remedies at law for any such breach would be inadequate.  Executive agrees that, if Executive breachesor attempts or threatens to breach any of the undertakings in Sections 7,8, 9 or 10(a) of this Agreement, then the Company shall be entitled toinjunctive relief without posting bond or other security, in addition to anyother remedy or remedies available to the Company at law or in equity.

## (b)           The Company acknowledges that a breach ofthe undertakings in Section 10(b) of this Agreement would causeirreparable damage to Executive, the exact amount of which shall be difficultto ascertain, and that remedies at law for any such breach would beinadequate.  The Company agrees that, ifthe Company or any of its Subsidiaries or affiliates breaches or attempts or threatens to breach any of theundertakings in Section 10(b) of this Agreement, then Executive shall beentitled to injunctive relief, without posting bond or other security, inaddition to any other remedy or remedies available to Executive at law or inequity.

# 12.           Withholding Taxes.  The Company may withhold from all paymentsdue to Executive (or his beneficiary or estate) hereunder all taxes which, byapplicable federal, state, local or other law, the Company is required towithhold therefrom.  Executive hasrepresented that he is and will continue to be a resident of the State of Texasfor all purposes.

# 13.           Directors andOfficers Insurance; Indemnity.  TheCompany shall take all steps necessary to ensure that Executive is coveredunder any directors and officers liability insurance policy in effect from timeto time for current and former directors and officers of the Company.  In addition, the Company shall hold harmlessand indemnify Executive against any and all expenses (including attorneys’fees), judgments, fines and amounts paid in settlement actually and reasonablyincurred by Executive in connection with any threatened, pending, or completedaction, suit, or proceeding whether civil, criminal, administrative, orinvestigative (including an action by or in the right of the corporation) towhich Executive is, was, or at any time becomes a party, or is threatened to bemade a party, by reason of the fact that Executive is, was, or at any timebecomes a director, officer, employee or agent of the Company, or is or wasserving, 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 beprovided to Executive by the Company under the provisions of the Bylaws and theArticles of Incorporation of the Company and Delaware law.

# 14.           Scope of Agreement.  Nothing in this Agreement shall be deemed toentitle Executive to continued employment with the Company or its Subsidiariesor shall require Executive to continue the employment relationship against hiswishes; *provided, however*, that any terminationof Executive’s employment during the Term of this Agreement shall be subject toall of the provisions of this Agreement as provided in Section 19.

# 15.           Successors; BindingAgreement.

## (a)           This Agreement shall inure to the benefit ofand be legally binding upon all successors and assigns of the Company andPOAMI.  The Company and POAMI willrequire a successor (whether direct or indirect, by purchase, merger,consolidation or otherwise) to all or substantially all of the business and/orassets of the Company and/or POAMI, by agreement in form and substancesatisfactory to Executive, to expressly assume and agree to perform this

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## Agreement in the same manner and to the same extent that the Companyand POAMI would be required to perform it if no such succession had takenplace.  For purposes of thisSection 15(a), “Company” shall mean the Company as defined above and allsuccessors to its business or assets that execute and deliver the agreementprovided for in this Section 15(a) or that otherwise become bound by theterms and provisions of this Agreement by operation of law.  For purposes of this Section 15(a), “POAMI”shall mean POAMI as defined above and all successors to its business or assetsthat execute and deliver the agreement provided for in this Section 15(a)or that otherwise become bound by the terms and provisions of this Agreement byoperation of law

## (b)           This Agreement shall inure to the benefit ofand be enforceable by Executive’s personal or legal representatives, executors,administrators, successors, heirs, distributes, devisees and legatees.  If Executive shall die while any amountswould be payable to Executive hereunder had Executive continued to live, allsuch amounts, unless otherwise provided herein, shall be paid in accordancewith the terms of this Agreement to such person or persons appointed in writingby Executive to receive such amounts or, if no person is so appointed, toExecutive’s estate.

# 16.           Notice.

## (a)           For purposes of this Agreement, all noticesand other communications required or permitted hereunder shall be in writingand shall be deemed to have been duly given when delivered or five (5) daysafter deposit in the United States mail, certified and return receiptrequested, postage prepaid, addressed as follows:

If to Executive:                                  Joseph R. Sanchez3115 Pepper RidgeWichita, KS  67025

If to the Company:                           Protection One, Inc.818 S. Kansas AvenueTopeka, KS  66612Attention:  General Counsel

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

## (b)           A written notice of Executive’s Date ofTermination by the Company or Executive, as the case may be, to the other,shall (i) indicate the specific termination provision in this Agreementrelied upon, (ii) to the extent applicable, set forth in reasonable detailthe facts and circumstances claimed to provide a basis for termination of Executive’semployment under the provision so indicated, and (iii) specify the Date ofTermination.  The failure by Executive orthe Company to set forth in such notice any fact or circumstance whichcontributes to a showing of Good Reason or Cause shall not waive any right ofExecutive or the Company hereunder or preclude Executive or the Company fromasserting such fact or circumstance in enforcing Executive’s or the Company’srights hereunder.

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# 17.           Full Settlement;Resolution of Disputes.  The Company’sobligation to make any payments provided for in this Agreement and otherwise toperform its obligations hereunder shall be in lieu and in full settlement ofall other severance payments to Executive under any other severance oremployment agreement between Executive and the Company, and any severance planof the Company.  In no event shallExecutive be obligated to seek other employment or take other action by way ofmitigation of the amounts payable to Executive under any of the provisions ofthis Agreement and except as otherwise provided in Section 5 (a)(iii),such amounts shall not be reduced whether or not Executive obtains otheremployment. Any dispute or controversy arising under or in connection with thisAgreement shall be settled exclusively by arbitration in Wilmington, Delawareby three arbitrators in accordance with the rules of the American ArbitrationAssociation then in effect.  Judgment maybe entered on the arbitrators’ award  inany court having jurisdiction.  Thearbitrators shall determine the allocation of the costs and expenses arising inconnection with any arbitration proceeding pursuant to this section based onthe arbitrator’s assessment of the merits of the positions of the parties.

# 18.           Employment withSubsidiaries.  Employment with theCompany for purposes of this Agreement shall include employment with anySubsidiary.

# 19.           Survival.  The respective obligations and benefitsafforded to the Company and Executive as provided in Sections 1, 5, 6, 7, 8, 9,10, 11, 12, 13, 15, 17, 19, 20, 22, 23, 24 and 25 shall survive the terminationof this Agreement.

# 20.           GOVERNING LAW;VALIDITY.  THE INTERPRETATION,CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY ANDCONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OFDELAWARE WITHOUT REGARD TO THE PRINCIPLE OF CONFLICTS OF LAWS.  THE INVALIDITY OR UNENFORCEABILITY OF ANYPROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OFANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN INFULL FORCE AND EFFECT.

# 21.           Counterparts.  This Agreement may be executed incounterparts, each of which shall be deemed to be an original and all of whichtogether shall constitute one and the same instrument.

# 22.           Miscellaneous.  No provision of this Agreement may bemodified or waived unless such modification or waiver is agreed to in writingand signed by Executive and by a duly authorized officer of the Company.  No waiver by either party hereto at any timeof any breach by the other party hereto of, or compliance with, any conditionor provision of this Agreement to be performed by such other party shall bedeemed a waiver of similar or dissimilar provisions or conditions at the sameor at any prior to subsequent time. Failure by Executive or the Company to insist upon strict compliancewith any provision of this Agreement or to assert any right Executive or theCompany may have hereunder, including without limitation, the right ofExecutive to terminate employment for Good Reason, shall not be deemed to be awaiver of such provision or right or any other provision or right of thisAgreement.  Except as otherwisespecifically provided herein, the rights of, and benefits payable to,

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# Executive, his estate orhis beneficiaries pursuant to this Agreement are in addition to any rights of,or benefits payable to, Executive, his estate or his beneficiaries under anyother employee benefit plan or compensation program of the Company.

# 23.           No Mitigation.  The amounts payable to Executive upon anytermination of his employment shall be considered severance pay inconsideration of past services rendered on behalf of the Company and hiscontinued service from the date hereof to the date he becomes entitled to suchpayments and shall be the sole amount of severance pay to which Executive isentitled from the Company and its affiliates upon termination of hisemployment.  Executive shall have no dutyto mitigate his damages by seeking other employment and, should Executiveactually receive compensation from any such other employment, the paymentsrequired hereunder shall not be reduced or offset by any such othercompensation.

# 24.           POAMI’s Obligations.  All of the obligations of the Companyhereunder shall also be direct obligations of POAMI without the need forExecutive to seek or exhaust remedies against the Company.

# 25.           Entire Agreement.  This Agreement constitutes the entireagreement of the parties with respect to its subject matter and supersedes andreplaces all previous verbal or written agreements that the parties may havemade, including the Prior Employment Agreement.

*   *  *   *   *

**[Remainderof page intentionally left blank. Signatures on next page.]**

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

 
|            | **PROTECTION ONE, INC.** |
|------------|--------------------------|
| ** ** |                     |
| ** ** |                     |
|       | By:                      | /s/ Richard  Ginsburg |   |   |
|       | Its:                     | President and  Chief Executive Officer |   |
|       |                     |   |   |
|       |                     |   |   |
| ** ** | **PROTECTION ONE ALARM** |
| ** ** | **MONITORING, INC.**     |
| ** ** | ** **               |
| ** ** | ** **               |
|       | By:                      | /s/ Richard  Ginsburg |   |   |
|       | Its:                     | President and  Chief Executive Officer |   |
|       |                     |   |   |
|       |                     |   |   |
|       | By:                      | /s/ Joseph R.  Sanchez |   |   |
|       |                     | Joseph R.  Sanchez |   |

 

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