Document:

EXHIBIT
10.17

FORM OF CHANGE IN CONTROL
AGREEMENT

POWER-ONE,
INC.

CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS
CHANGE IN CONTROL SEVERANCE AGREEMENT is made and entered into by and between Power-One,
Inc., a Delaware corporation (hereinafter referred to as the “Company”) and                            
(hereinafter referred to as the “Executive”).

RECITALS

A.                                   The Board of Directors of the Company has
approved the Company entering into a severance agreement with the Executive.

B.                                     The Executive is a key executive of the
Company.

C.                                     Should the possibility of a Change in
Control of the Company arise, the Board believes it imperative that the Company
and the Board should be able to rely upon the Executive to continue in his
position, and that the Company should be able to receive and rely upon the
Executive’s advice, if requested, as to the best interests of the Company and
its stockholders without concern that the Executive might be distracted by the
personal uncertainties and risks created by the possibility of a Change in
Control.

D.                                    Should the possibility of a Change in
Control arise, in addition to his regular duties, the Executive may be called
upon to assist in the assessment of such possible Change in Control, advise
management and the Board as to whether such Change in Control would be in the
best interests of the Company and its stockholders, and to take such other
actions as the Board might determine to be appropriate.

NOW
THEREFORE, to
help assure the Company that it will have the continued dedication of the
Executive and the availability of his advice and counsel notwithstanding the
possibility, threat, or occurrence of a Change in Control of the Company, and
to induce the Executive to remain in the employ of the Company in the face of
these circumstances and for other good and valuable consideration, the Company
and the Executive agree as follows:

Article 1.                                            Term

This Agreement
shall be effective as of [                       ]
(the “Effective Date”).  This Agreement
will continue in effect through [                       ].  However, at the end of such one (1) year
period and, if extended, at the end of each additional year thereafter, the
term of this Agreement shall be extended automatically for one (1) additional
year, unless the Committee delivers written notice at least six (6) months
prior to the end of such term, or extended term, to the Executive that this
Agreement will not be extended, and if such notice is timely given this
Agreement will terminate at the end of the term then in progress; provided,
however, that this provision for automatic extension shall have no
application following a Change in Control.

However, in the
event a Change in Control occurs during the original or any extended term, this
Agreement will remain in effect for the longer of: (i) twenty-four (24) months
beyond

the month in which such
Change in Control occurred; or (ii) until all obligations of the Company
hereunder have been fulfilled, and until all benefits required hereunder have
been paid to the Executive.  Any subsequent
Change in Control (“Subsequent Change in Control”) that occurs during the
original or any extended term shall also continue the term of this Agreement
until the later of: (i) twenty-four (24) months beyond the month in which such
Subsequent Change in Control occurred; or (ii) until all obligations of the
Company hereunder have been fulfilled, and until all benefits required
hereunder have been paid to the Executive; provided, however,
that if a Subsequent Change in Control occurs, it shall only be considered a
Change in Control under this Agreement if it occurs no later than twenty-four
(24) months after the immediately preceding Change in Control or Subsequent
Change in Control.

Article 2.                                            ERISA

This Agreement is
intended as part of a severance program of the Company that constitutes (i) a
pension plan within the meaning of Section 3(2) of ERISA, and (ii) an unfunded
pension plan maintained by the Company for a select group of management or
highly compensated employees within the meaning of Department of Labor
Regulation 2520.104-23 promulgated under ERISA, and Sections 201, 301, and 401
of ERISA.

Article 3.                                            Definitions

Whenever used in
this Agreement, the following terms shall have the meanings set forth below
and, when the meaning is intended, the initial letter of the word is
capitalized:

(a)                                  “Agreement” means this Change in Control
Severance Agreement.

(b)                                 “Base Salary” means the salary of record
paid to the Executive by the Company as annual salary (whether or not
deferred), but excludes amounts received under incentive or other bonus plans.

(c)                                  “Beneficial Owner” shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.

(d)                                 “Beneficiary” means the persons or
entities designated or deemed designated by the Executive pursuant to Section
11.2.

(e)                                  “Board” means the Board of Directors of
the Company.

(f)                                    “Cause” means the occurrence of either or
both of the following:

(i)                                     the Executive’s conviction for committing
an act of fraud, embezzlement, theft, or other act constituting a felony (other
than traffic related offenses or as a result of vicarious liability); or

(ii)                                  the willful engaging by the Executive in
misconduct that is significantly injurious to the Company.  However, no act or failure to act, on the
Executive’s part shall be considered “willful” unless done, or omitted to be
done, by the Executive not in good faith and without reasonable belief that the
Executive’s action or omission was in the best interest of the Company.

(g)                                 “Change in Control” of the Company shall
be deemed to have occurred as of the first day that any one or more of the
following conditions shall have been satisfied:

(i)                                     Any Person (other than those Persons in
control of the Company as of the Effective Date) becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing twenty
percent (20%) or more of either (1) the then-outstanding shares of common stock
of the Company (the “Outstanding
Company Common Stock”) or (2) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that, for
purposes of this clause (i), the following acquisitions shall not constitute a
Change in Control: (A) any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any affiliate of
the Company or a successor, or (D) any acquisition by any entity pursuant to a
transaction that complies with Sections (g)(ii), (iii) and (iv) below; further
provided, that, creditors of the Company who become stockholders of the
Company in connection with any bankruptcy of the Company under the laws of the
United States shall not, by virtue of such bankruptcy, be deemed a “group” or a
single Person for the purposes of this clause (i) (provided that any one
of such creditors may trigger a Change in Control pursuant to this clause (i)
if such creditor’s ownership of Company securities equals or exceeds the
foregoing threshold);

(ii)                                  On any day after the Effective Date (the “Measurement
Date”) Continuing Directors cease for any reason to constitute either: (1) if
the Company does not have a Parent, a majority of the Board; or (2) if the
Company has a Parent, a majority of the Board of Directors of the Controlling
Parent.  A director is a “Continuing
Director” if he or she either:

(1)                                  was a member of the Board on the applicable
Initial Date (an “Initial Director”); or

(2)                                  was elected to the Board (or the Board of
Directors of the Controlling Parent, as applicable), or was nominated for
election by the Company’s or the Controlling Parent’s stockholders, by a vote
of at least two-thirds (2/3) of the Initial Directors then in office.

A member of the
Board (or Board of Directors of the Controlling Parent, as applicable) who was
not a director on the applicable Initial Date shall be deemed to be an Initial
Director for purposes of clause (2) above if his or her election, or nomination
for election by the Company’s or the Controlling Parent’s stockholders, was
approved by a vote of at least two-thirds (2/3) of the Initial Directors
(including directors elected after the applicable Initial Date who are deemed
to be Initial Directors by application of this provision) then in office; provided
that such member of the Board shall not be deemed to be an Initial Director if
his or her initial assumption

of office occurs
as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board.

“Initial Date”
means the later of (1) the Effective Date or (2) the date that is two (2) years
before the Measurement Date.

(iii)                               Consummation of a reorganization, merger, statutory
share exchange or consolidation or similar corporate transaction involving the
Company or any of its subsidiaries, a sale or other disposition of all or
substantially all of the assets of the Company, or the acquisition of assets or
stock of another entity by the Company or any of its subsidiaries (each, a “Business
Combination”), in each case unless, following such Business Combination, (1)
all or substantially all of the individuals and entities that were the
Beneficial Owners of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such Business Combination
Beneficially Own, directly or indirectly, more than sixty percent (60%) of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the entity resulting from such Business
Combination (including, without limitation, an entity that, as a result of such
transaction, is a Parent of the Company or the successor of the Company) in
substantially the same proportions as their ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, (2) no Person
(excluding any entity resulting from such Business Combination or a Parent of
the Company or any successor of the Company or any employee benefit plan (or
related trust) of the Company or such entity resulting from such Business
Combination or a Parent of the Company or the successor entity) Beneficially
Owns, directly or indirectly, twenty percent (20%) or more of, respectively,
the then-outstanding shares of common stock of the entity resulting from such
Business Combination or the combined voting power of the then-outstanding
voting securities of such entity, except to the extent that the ownership in
excess of twenty percent (20%) existed prior to the Business Combination, and
(3) a Change in Control is not triggered pursuant to clause (ii) above with
respect to the Company (including any successor entity) or any Parent of the
Company (or the successor entity).

(iv)                              A complete liquidation or dissolution of
the Company other than in the context of a transaction that does not constitute
a Change in Control of the Company under clause (iii) above.

Notwithstanding
the foregoing, in no event shall a transaction or other event that occurred
prior to the Effective Date constitute a Change in Control.  Notwithstanding anything to the contrary in
clause (iii) above to the contrary, a change in ownership of the Company
resulting from creditors of the Company

becoming
stockholders of the Company in connection with any bankruptcy of the Company
under the laws of the United States shall not trigger a Change in Control
pursuant to clause (iii) above.

(h)                                 “Code” means the United States Internal
Revenue Code of 1986, as amended.

(i)                                     “Committee” means the Compensation
Committee of the Board, or any other committee appointed by the Board to
perform the functions of the Compensation Committee.

(j)                                     “Company” means Power-One, Inc., a
Delaware corporation (including, for purposes of determining whether the
Executive is employed by the Company, any and all subsidiaries specified by the
Committee), or any successor thereto as provided in Article 10.

(k)                                  “Controlling Parent” means the Company’s
Parent so long as a majority of the voting stock or voting power of that Parent
is not Beneficially Owned, directly or indirectly through one or more
subsidiaries, by any other Person.  In
the event that the Company has more than one “Parent,” then “Controlling Parent”
shall mean the Parent of the Company the majority of the voting stock or voting
power of which is not Beneficially Owned, directly or indirectly through one or
more subsidiaries, by any other Person.

(l)                                     “Disability” means disability as defined
in the Company’s long-term disability plan in which the Executive participates
at the relevant time or, if the Executive does not participate in a Company
long-term disability plan at the relevant time, such term shall mean a “permanent
and total disability” within the meaning of Section 22(e)(3) of the Code.

(m)                               “Effective Date” has the meaning given to
such term in Article 1 hereof.

(n)                                 “Effective Date of Termination” means the
date on which a Qualifying Termination occurs.

(o)                                 “ERISA” means the Employee Retirement
Income Security Act of 1974, as amended.

(p)                                 “Exchange Act” means the United States
Securities Exchange Act of 1934, as amended.

(q)                                 “Executive” means the individual
identified in the first sentence, and on the signature page, of this Agreement.

(r)                                    “Good Reason” means, without the
Executive’s express written consent, the occurrence of any one or more of the
following:

(i)                                     A material reduction in the nature or
status of the Executive’s authorities, duties, and/or responsibilities, (when
such authorities, duties, and/or responsibilities are viewed in the aggregate)
from their level in effect on the

day
immediately prior to the start of the Protected Period, other than an
insubstantial and inadvertent act that is remedied by the Company promptly
after receipt of notice thereof given by the Executive; provided that if
the Executive is a vice president, for purposes of the preceding phrase the
Executive’s loss of vice president status (other than a promotion to a higher
level officer) will constitute Good Reason. 
In addition, Good Reason will be deemed to exist if the Executive’s
reporting relationship is diminished from the Executive’s reporting
relationship in effect on the day immediately prior to the start of the
Protected Period (for example, if the Executive reports directly to the Company’s
Chief Executive Officer on the day immediately prior to the start of the
Protected Period, Good Reason will be deemed to exist if the Executive’s
reporting relationship is changed such that the Executive no longer reports
directly to the Chief Executive Officer of the Company or any Parent or
directly to the Board of Directors of the Company or any Parent).  The change in status of the Company from a
publicly-traded company to a company the securities of which are not
publicly-traded (including any related termination of the Company’s reporting
obligations under the Exchange Act) shall not, in and of itself, constitute
Good Reason or a material reduction in the nature or status of the Executive’s
authorities, duties, and/or responsibilities.

(ii)                                  A reduction by the Company in the
Executive’s Base Salary as in effect immediately prior to the start of the
Protected Period or as the same shall be increased from time to time.

(iii)                               A significant reduction by the Company of
the Executive’s aggregate incentive opportunities under the Company’s short
and/or long-term incentive programs, as such opportunities exist immediately
prior to the start of the Protected Period, or as such opportunities may be
increased from time to time.  For this
purpose, a significant reduction in the Executive’s incentive opportunities
shall be deemed to have occurred in the event his targeted annualized award
opportunities and/or the degree of probability of attainment of such annualized
award opportunities are materially diminished by the Company from the levels
and probability of attainment that existed immediately prior to the start of
the Protected Period.  If the Company has
a Parent, a significant reduction of the Executive’s aggregate incentive
opportunities under the Company’s short and/or long-term incentive programs
shall not be deemed to have occurred if there is an across-the-board
reduction in or elimination of any such program which similarly affects all
executives of the Company and the reduced or eliminated incentives are replaced
by a similar program of a Parent.

(iv)                              The failure of the Company to maintain
(x) the Executive’s relative level of coverage and accruals under the Company’s
employee benefit and/or retirement plans, policies, practices, or arrangements
in which the Executive participates immediately prior to the start of the
Protected Period, both in terms of the amount of benefits provided, and amounts
accrued and

(y)
the relative level of the Executive’s participation in such plans, policies, practices,
or arrangements on a basis at least as beneficial as, or substantially
equivalent to, that on which the Executive participated in such plans
immediately prior to the start of the Protected Period.  For this purpose, the Company may eliminate
and/or modify existing programs and coverage levels; provided, however,
that the Executive’s level of coverage under all such programs must be at least
as great as is provided to executives who have the same or lesser levels of
reporting responsibilities within the Company’s organization.

(v)                                 The failure of the Company to obtain a
satisfactory agreement from any successor to the Company to assume and agree to
perform this Agreement, as contemplated in Article 10.

(vi)                              Any purported termination by the Company
of the Executive’s employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 4.6 and for purposes of this
Agreement, no such purported termination shall be effective.

(vii)                           The Executive is informed by the Company that his
principal place of employment for the Company will be relocated to a location
that is greater than thirty-five (35) miles away from the Executive’s principal
place of employment for the Company at the start of the corresponding Protected
Period; provided that, if the Company communicates an intended effective
date for such relocation, in no event shall Good Reason exist pursuant to this
clause (vii) more than ninety (90) days before such intended effective date.

The
Executive’s right to terminate employment for Good Reason shall not be affected
by the Executive’s incapacity due to physical or mental illness.  The Executive’s continued employment shall
not constitute a consent to, or a waiver of rights with respect to, any
circumstances constituting Good Reason herein; provided, however,
that if the Executive does not terminate employment and claim Good Reason for
such termination within ninety (90) days after the Executive has knowledge of
an event or circumstance that would constitute Good Reason, then the Executive
shall be deemed to have waived his right to claim Good Reason as to that
specific fact or circumstance (except that the event or circumstance may be
considered for purposes of determining whether any subsequent, separate, event
or circumstance constitutes Good Reason; for example, and without limitation, a
reduction in the Executive’s authorities that is deemed waived by operation of
this clause may be considered for purposes of determining whether any
subsequent reduction in the Executive’s authorities (when taken into
consideration with the first reduction) constitutes a “material reduction” in
the nature or status of the Executive’s authorities from their level in effect
on the day immediately prior to the start of the Protected Period).

(s)                                  “Parent” means an entity that
Beneficially Owns a majority of the voting stock or voting power of the
Company, or all or substantially all of the Company’s assets, directly or
indirectly through one or more subsidiaries.

(t)                                    “Qualifying Termination” has the meaning
given to such term in Section 4.2(a).

(u)                                 “Severance Benefits” means the payments
and/or benefits provided in Section 4.3.

Article 4.                                            Severance Benefits

4.1.                    Right to Severance Benefits. 
The Executive shall be entitled to receive from the Company Severance
Benefits, as described in Section 4.3, if the Executive has incurred a
Qualifying Termination.

The Executive shall not
be entitled to receive Severance Benefits if his employment terminates
(regardless of the reason) before the Protected Period (as such term is defined
in Section 4.2(c)) corresponding to a Change in Control of the Company or more
than twenty-four (24) months after the date of a Change in Control of the
Company.

4.2.                    Qualifying Termination.

(a)                                  Subject to Sections 4.2(d), 4.4, and 4.5,
the occurrence of any one or more of the following events within the Protected
Period corresponding to a Change in Control of the Company, or within
twenty-four (24) calendar months following the date of a Change in Control of
the Company shall constitute a “Qualifying Termination”:

(i)                                     An involuntary termination of the
Executive’s employment by the Company for reasons other than Cause;

(ii)                                  A voluntary termination of employment by
the Executive for Good Reason;

(iii)                               A successor company fails or refuses to assume by
written instrument the Company’s obligations under this Agreement, as required
by Article 10; or

(iv)                              The Company or any successor company
repudiates or breaches any of the provisions of this Agreement.

(b)                                 If more than one of the events set forth
in Section 4.2(a) occurs, such events shall constitute but a single Qualifying
Termination and the Executive shall be entitled to but a single payment of the
Severance Benefits.

(c)                                  The “Protected Period” corresponding to a
Change in Control of the Company shall be a period of time determined in
accordance with the following:

(i)                                     If the Change in Control is triggered by
a tender offer for shares of the Company’s stock or by the offeror’s
acquisition of shares pursuant to such a tender offer, the Protected Period
shall commence on the date of the initial tender offer and shall continue
through and including the date of the Change in Control; provided that
in no case will the Protected Period

commence
earlier than the date that is six (6) months prior to the Change in Control.

(ii)                                  If the Change in Control is triggered by
a merger, consolidation, or reorganization of the Company with or involving any
other corporation, the Protected Period shall commence on the date that serious
and substantial discussions first take place to effect the merger,
consolidation, or reorganization and shall continue through and including the
date of the Change in Control; provided that in no case will the
Protected Period commence earlier than the date that is six (6) months prior to
the Change in Control.

(iii)                               In the case of any Change in Control not described in
clause (i) or (ii) above, the Protected Period shall commence on the date that
is six (6) months prior to the Change in Control and shall continue through and
including the date of the Change in Control.

(d)                                 Notwithstanding anything else contained
herein to the contrary, the Executive’s termination of employment on account of
reaching mandatory retirement age, as such age may be defined from time to time
in policies adopted by the Company prior to the commencement of the Protected
Period, and consistent with applicable law, shall not be a Qualifying
Termination.

(e)                                  Notwithstanding anything else contained
herein to the contrary (other than those provisions that contain an express
exception to this Section 4.2(e)), the Executive’s Severance Benefits under
this Agreement shall be reduced by the severance benefits (including, without
limitation, any other change-in-control severance benefits and any other severance
benefits generally) that the Executive may be entitled to under any other plan,
program, agreement or other arrangement with the Company (including, without
limitation, any such benefits provided for by an employment agreement).  For purposes of the foregoing, any cash
severance benefits payable to the Executive under any other plan, program,
agreement or other arrangement with the Company shall offset the cash severance
benefits otherwise payable to the Executive under this Agreement on a dollar-for-dollar
basis.  For purposes of the foregoing,
non-cash severance benefits to be provided to the Executive under any other
plan, program, agreement or other arrangement with the Company shall offset any
corresponding benefits otherwise to be provided to the Executive under this
Agreement or, if there are no corresponding benefits otherwise to be provided
to the Executive under this Agreement, the value of such benefits shall offset
the cash severance benefits otherwise payable to the Executive under this
Agreement on a dollar-for-dollar basis. 
If the amount of other benefits to be offset against the cash severance
benefits otherwise payable to the Executive under this Agreement in accordance
with the preceding two sentences exceeds the amount of cash severance benefits
otherwise payable to the Executive under this Agreement, then the excess may be
used to offset other non-cash severance benefits otherwise to be provided to
the Executive under this Agreement on a dollar-for-dollar basis.  For purposes of this paragraph, the Committee
shall reasonably determine the value of any non-cash benefits.

4.3.                    Description of Severance Benefits. 
In the event that the Executive becomes entitled to receive Severance
Benefits, as provided in Sections 4.1 and 4.2, the Company shall pay to the
Executive and provide him with the following:

(a)                                  An amount equal to [2x for CEO and COO; 1x for other
named executive officers] times the Executive’s highest annualized rate of Base Salary
in effect at any time after the commencement of the Protected Period and on or
before the Effective Date of Termination.

(b)                                 An amount equal
to [2x
for CEO and COO; 1x for other named executive officers]  the highest aggregate
bonus(es) paid by the Company to the Executive for any one of the three (3) full fiscal years of the Company
immediately preceding Executive’s Effective Date of Termination.

(c)                                  A continuation of the Executive’s medical
coverage, dental coverage, and group term life insurance for the Executive, his
spouse, and his eligible dependents for the [2 for CEO and COO; 1 for other
named executive officers] year(s) following the Executive’s Effective Date of
Termination; provided that such continuation of coverage shall run
concurrently with COBRA continuation or similar state law continuation periods;
and provided further that the continuation of such coverage shall be
discontinued prior to the end of the [2 for CEO and COO; 1 for other named executive
officers]
year period in the event the Executive has available substantially similar
benefits from a subsequent employer, as reasonably determined by the
Committee.  Except as provided in the
next sentence, such benefits shall be provided to the Executive at the same
premium cost, and at the same coverage level, as in effect as of the Executive’s
Effective Date of Termination.  However,
in the event the premium cost and/or level of coverage shall change for all
employees of the Company, the cost and/or coverage level, likewise, shall
change for the Executive in a corresponding manner.  The continuation of coverage for the period
contemplated by this Section 4.3(c) shall be coordinated with and paid
secondary to any benefits that the Executive, his spouse, or his dependent
receives from another employer or from Medicare (following the Executive’s, his
spouse’s, and/or his dependent’s entitlement to Medicare benefits) to the
maximum extent permissible under relevant law.

(d)                                 A lump-sum cash amount equal to the
portion of the Executive’s account under the Company’s qualified retirement
plan (including, without limitation, any 401(k) matching contributions) that
has not become vested under the terms of such plan as of the Effective Date of
Termination.

(e)                                  A lump-sum cash amount equal to the
portion of the Executive’s account under any Company nonqualified deferred
compensation or other supplemental retirement plan that has not become vested
under the terms of such plan as of the Effective Date of Termination.

(f)                                    If any stock option, restricted stock, or
other equity or equity-based award granted by the Company to the Executive is
subject to a vesting schedule and does not automatically become fully vested
upon or in connection with the termination of the Executive’s employment with
the Company or the related Change in Control

event,
the portion of such award that was scheduled to vest (assuming that the
Executive continued to be employed by the Company) at any time within the [2 for CEO and COO; 1 for other
named executive officers]  year
period following the Effective Date of Termination shall automatically become
vested as of the Effective Date of Termination; provided, however,
that any portion of such award remaining unvested after giving effect to the
foregoing clause shall immediately terminate upon the Effective Date of
Termination.  In the event that the
Effective Date of Termination occurs during the Protected Period related to a Change
in Control and a portion of a stock option or other award referred to in the
preceding sentence is deemed to become vested in connection with the
termination of the Executive’s employment pursuant to the preceding sentence,
and such portion of the award would otherwise terminate or expire upon or prior
to the date of the related Change in Control, the Executive shall be given a
reasonable opportunity to exercise such accelerated portion of the option or
other award before it terminates.

(g)                                 The Company shall pay or reimburse the
Executive for up to $15,000 of outplacement services obtained by the Executive
during the twelve (12) month period following the Effective Date of
Termination.

4.4.                    Termination Due to Disability,
Death or Retirement.  Termination of the Executive’s employment due
to the Executive’s death or Disability is not a Qualifying Termination.  However, if immediately prior to the
condition or event leading to, or the commencement of, the Disability of the
Executive (but not the death of the Executive), the Executive would have
experienced a Qualifying Termination if he had terminated at that time, then
upon termination of his employment for Disability he shall be entitled to the
benefits provided by this Agreement for a Qualifying Termination.  A voluntary termination of employment by the
Executive due to the Executive’s retirement is not a Qualifying
Termination.  However, if immediately
prior to the Executive’s retirement (but not death), the Executive would have
experienced a Qualifying Termination if he had terminated at that time, then
upon his retirement he shall (subject to Section 4.2(d)) be entitled to the
benefits provided by this Agreement for a Qualifying Termination.

4.5.                    Termination for Cause or by the
Executive Other Than for Good Reason   Termination
of the Executive’s employment by the Company for Cause or by the Executive
other than for Good Reason does not constitute a Qualifying Termination.

4.6.                    Notice of Termination. 
Any termination by the Company for Cause or by the Executive for Good
Reason shall be communicated by a Notice of Termination.  For purposes of this Agreement, a “Notice of
Termination” shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated.

Article
5.                                            Form and Timing of Severance Benefits;
Tax Withholding;

5.1.                    Form and Timing of Severance
Benefits.  The Severance Benefits described in Section
4.3(a), 4.3(b), 4.3(d) and 4.3(e) shall be paid in cash to the Executive in a
single lump sum as soon as practicable following the Effective Date of
Termination, but in no event beyond thirty (30) days from such date.

5.2.                    Withholding of Taxes. 
The Company shall be entitled to withhold from any amounts payable under
or pursuant to this Agreement all taxes as legally shall be required
(including, without limitation, any United States Federal taxes, and any other
state, city, or local taxes).

Article 6.                                            Section 280G Potential Cut-Back

6.1.                    Cut-Back. 
Notwithstanding anything contained in this Agreement to the contrary, to
the extent that any payment or distribution of any type to or for the Executive
by the Company or any of its affiliates, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise
(including, without limitation, any accelerated vesting of stock options or
restricted stock granted by the Company pursuant to this Agreement or
otherwise) (collectively, the “Total Payments”) is or will be subject to the
excise tax imposed under Section 4999 of the Code (which reference includes,
for purposes of this Agreement, any similar successor provision to Section
4999), then the Total Payments shall be reduced (but not below zero) so that
the maximum amount of the Total Payments (after reduction) shall be one dollar
($1.00) less than the amount which would cause the Total Payments to be subject
to the excise tax imposed by Section 4999 of the Code.  Unless the Executive shall have given prior
written notice to the Company to effectuate a reduction in the Total Payments
if such a reduction is required, the Company shall reduce or eliminate the
Total Payments by first reducing or eliminating any cash severance benefits,
then by reducing or eliminating any accelerated vesting of stock options, then
by reducing or eliminating any accelerated vesting of restricted stock, then by
reducing or eliminating any other remaining Total Payments.  The preceding provisions of this Section 6.1
shall take precedence over the provisions of any other plan, arrangement or
agreement governing the Executive’s rights and entitlements to any benefits or
compensation; provided, however, that if the Executive is a party
to a written employment or other written agreement with the Company that
contains express provisions for a so-called “gross-up” payment to the extent
that excise taxes are imposed under Section 4999 of the Code, the Section 280G
and/or Section 4999 provisions of such employment or other agreement shall
control.

6.2.                    Determination. 
Any determination that Total Payments to the Executive must be reduced
or eliminated in accordance with the forgoing provisions of this Section 6 and
the assumptions to be utilized in arriving at such determination, shall be made
by a nationally recognized accounting firm or consulting firm with experience
in such matters selected by the Company (the “Accounting Firm”), which shall
provide detailed supporting calculations both to the Company and the Executive
within fifteen (15) business days after the date such calculation is requested
by the Company or the Executive.  In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Executive
shall appoint another nationally recognized accounting or consulting firm with
experience in such matters to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm
hereunder).  All fees and expenses of the
Accounting Firm shall be borne solely by the Company.  If a reduction or elimination of Total
Payments to the Executive in accordance with the foregoing is necessary based
on the Accounting Firm’s determination, the Accounting Firm shall furnish the
Executive with a written opinion that failure to limit the amount of the Total
Payments would result in the imposition of a tax under Section 4999 of the Code.  Any determination by the Accounting Firm
shall be binding upon the Company and the Executive.  As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that

Total Payments to the
Executive which will not have been made by the Company should have been made (“Underpayment”).  The Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.  In the event that any Total Payment made to
the Executive shall be determined by the Accounting Firm to result in the
imposition of any tax under Section 4999 of the Code, the Executive shall
promptly repay the amount of such excess to the Company together with interest
on such amount (at the same rate as is applied to determine the present value
of payments under Section 280G or any successor thereto), from the date the
reimbursable payment was received by the Executive to the date the same is
repaid to the Company.

Article 7.                                            The Company’s Payment Obligation

7.1.                    Payment of Obligations Absolute. 
Except as provided in Sections 4.2(e) and 5.2 and in Article 6, the
Company’s obligation to make the payments and the arrangements provided for
herein shall be absolute and unconditional, and shall not be affected by any
circumstances, including, without limitation, any offset, counterclaim,
recoupment, defense, or other right which the Company may have against the
Executive or anyone else.  All amounts
payable by the Company hereunder shall be paid without notice or demand.  Each and every payment made hereunder by the Company
shall be final, and the Company shall not seek to recover all or any part of
such payment from the Executive or from whoever may be entitled thereto, for
any reasons whatsoever, except as otherwise provided in Article 6 or Article 9.

The Executive shall not
be obligated to seek other employment in mitigation of the amounts payable or
arrangements made under any provision of this Agreement, and the obtaining of
any such other employment shall in no event effect any reduction of the Company’s
obligations to make the payments and arrangements required to be made under
this Agreement, except to the extent provided in Section 4.3(c).

7.2.                    Contractual Right to Benefits. 
This Agreement establishes and vests in the Executive a contractual
right to the benefits to which he or she is entitled hereunder.  The Company expressly waives any ability, if
possible, to deny liability for any breach of its contractual commitment
hereunder upon the grounds of lack of consideration, accord and satisfaction or
any other defense.  In any dispute
arising after a Change in Control as to whether the Executive is entitled to
benefits under this Agreement, there shall be a presumption that the Executive
is entitled to such benefits and the burden of proving otherwise shall be on
the Company.  However, nothing herein
contained shall require or be deemed to require, or prohibit or be deemed to
prohibit, the Company to segregate, earmark, or otherwise set aside any funds
or other assets, in trust or otherwise, to provide for any payments to be made
or required hereunder.

7.3.                    Pension Plans; Duplicate Benefits. 
All payments, benefits and amounts provided under this Agreement shall
be in addition to and not in substitution for any pension rights under the
Company’s tax-qualified pension plan, supplemental retirement plans,
nonqualified deferred compensation plans, and any disability, workers’
compensation or other Company benefit plan distribution that the Executive is
entitled to at his Effective Date of Termination.  Notwithstanding the foregoing, this Agreement
shall not create an inference that any duplicate payments shall be
required.  No payments made pursuant to
this Agreement shall be considered compensation for purposes of any such
benefit plan.  Payment of the Executive’s
accrued and unpaid Base Salary and accrued vacation pay through the Executive’s
Effective Date of Termination shall be deemed to not

duplicate any benefit
contemplated by this Agreement and shall not result in an offset pursuant to
Section 4.2(e).  If the acceleration of
vesting, lapse of restrictions and/or payout provisions triggered by a Change
in Control as to any award held by the Executive under any long-term incentive
plan are more favorable to the Executive as to that award than the provisions
of Section 4.3(f), the provisions more favorable to the Executive shall
control; provided that if the provisions of such a plan are more
favorable to the Executive in the circumstances and the provisions of such plan
are deemed to control as to an award, Section 4.3(f) shall not be applied to
provide any duplicate benefits or result in any greater vesting as to the award
than the provisions of such plan.

Article 8.                                            Trade Secrets; Non-Solicitation and
Non-Disparagement

By executing this
Agreement and again by receiving any benefits provided for by this Agreement,
the Executive agrees follows:

(a)                                  In the course of performing his duties
for the Company, the Executive will receive, and acknowledges that he or she
has received, confidential information, including without limitation,
information not available to competitors relating to the Company’s existing and
contemplated financial plans, products, business plans, operating plans,
research and development information, and customer information, all of which is
hereinafter referred to as “Trade Secrets.” 
The Executive agrees that he or she will not, either during his
employment or subsequent to the termination of his employment with the Company,
directly or indirectly disclose, publish or otherwise divulge any Trade Secret
of the Company or any of its affiliates to anyone outside the Company, or use
such information in any manner which would adversely affect the business or
business prospects of the Company, without prior written authorization from the
Company to do so.  The Executive further
agrees that if, at the time of the termination of his employment with the
Company, he is in possession of any documents or other written or electronic
materials constituting, containing or reflecting Trade Secrets, the Executive
will return and surrender all such documents and materials to the Company upon
leaving its employ.  The restrictions and
protection provided for in this Section 8(a) shall be in addition to any
protection afforded to Trade Secrets by law or equity and in addition to any
protection afforded to Trade Secrets by any other agreement between the
Executive and the Company.

(b)                                 For a period of one year following the
termination of the Executive’s employment with the Company, the Executive shall
not, directly or indirectly through, aid, assistance or counsel, on the
Executive’s own behalf or on behalf of another person or entity (i) contact,
solicit or offer to hire any person who was, within a period of six months
prior to the termination of the Executive’s employment with the Company,
employed by the Company or one of its subsidiaries, or (ii) by any means issue
or communicate any private or public statement that may be critical or
disparaging of the Company or any of its affiliates, or any of their respective
products, services, officers, directors or employees.

Article 9.                                            Claims Procedure

9.1.                    Committee Review. 
The Executive or, in the event of the Executive’s death, the Executive’s
Beneficiary (as applicable, the “Claimant”) may deliver to the Committee a
written

claim for a determination
with respect to the amounts distributable to such Claimant from this
Agreement.  Such claim shall be delivered
to the Committee care of the Company in accordance with the notice provisions
of Section 11.6.  If such a claim relates
to the contents of a notice received by the Claimant, the claim must be made
within sixty (60) days after such notice was received by the Claimant.  All other claims must be made within two
hundred and seventy (270) days of the date on which the event that caused the
claim to arise occurred (subject to Section 3(r) as to the timing of certain
claims related to a purported termination for Good Reason).  The claim must state with particularity the
determination desired by the Claimant.

9.2.                    Notification of Decision. 
The Committee shall consider a Claimant’s claim pursuant to Section 9.1
within a reasonable time, but no later than ninety (90) days after receiving
the claim.  If the Committee determines
that special circumstances require an extension of time for processing the
claim, written notice of the extension shall be furnished to the Claimant prior
to the termination of the initial ninety (90) day period.  In no event shall such extension exceed a
period of ninety (90) days from the end of the initial period.  The extension notice shall indicate the
special circumstances requiring an extension of time and the date by which the
Committee expects to render the benefit determination.  The Committee shall notify the Claimant in
writing:

(c)                                  that the Claimant’s requested
determination has been made, and that the claim has been allowed in full; or

(d)                                 that the Committee has reached a
conclusion contrary, in whole or in part, to the Claimant’s requested
determination, and such notice must set forth in a manner calculated to be
understood by the Claimant:

(i)                                     the specific reason(s) for the denial of
the claim, or any part of it;

(ii)                                  specific reference(s) to pertinent
provisions of this Agreement upon which such denial was based;

(iii)                               a description of any additional material
or information necessary for the Claimant to perfect the claim, and an
explanation of why such material or information is necessary;

(iv).                           a statement that the Claimant is entitled
to receive, upon request and free of charge, reasonable access to and copies
of, all documents, records and other information relevant (as defined in
applicable ERISA regulations) to the Claimant’s claim for benefits; and

(v)                                 a statement of the Claimant’s right to
seek arbitration pursuant to Section 9.4.

9.3.                    Pre and Post-Change in
Control Procedures.  With respect to claims made prior to the occurrence
of a Change in Control, a Claimant’s compliance with the foregoing provisions
of this Article 9 is a mandatory prerequisite to a Claimant’s right to commence
arbitration pursuant to Section 9.4 with respect to any claim for benefits
under this Agreement.  With respect to
claims made upon and after the occurrence of a Change in Control, the Claimant
may proceed directly to arbitration in accordance with Section 9.4 and need not
first satisfy the foregoing provisions of this Article 9.

9.4.                    Arbitration of Claims. 
All claims or controversies arising out of or in connection with this
Agreement, that the Company may have against any Claimant, or that any Claimant
may have against the Company or against its officers, directors, employees or
agents acting in their capacity as such, shall, subject to the initial review
provided for in the foregoing provisions of this Article 9 that are effective
with respect to claims brought prior to the occurrence of a Change in Control,
be resolved through arbitration as provided in this Section 9.4.  The decision of an arbitrator on any issue,
dispute, claim or controversy submitted for arbitration, shall be final and
binding upon the Company and the Claimant and that judgment may be entered on
the award of the arbitrator in any court having proper jurisdiction.  The arbitrator shall review de novo any claim previously considered by
the Committee pursuant to Section 9.1.

Except as otherwise
provided in this procedure or by mutual agreement of the parties, any
arbitration shall be administered: (1) in accordance with the then-current
Model Employment Arbitration Procedures of the American Arbitration Association
(“AAA”) before an arbitrator who is licensed to practice law in the state in
which the arbitration is convened; or (2) if locally available, the Judicial
Arbitration & Mediation Services, Inc. (“JAMS”), in accordance with the
JAMS procedures then in effect.  The
party who did not initiate the claim can designate between JAMS or AAA (the “Tribunal”).  The arbitration shall be held in the city in
which the Claimant is or was last employed by the Company in the nearest
Tribunal office or at a mutually agreeable location.  Pre-hearing and post-hearing procedures may
be held by telephone or in person as the arbitrator deems necessary.

The arbitrator shall be
selected as follows: if the parties cannot agree on an arbitrator, the Tribunal
(JAMS or AAA) shall then provide the names of nine (9) available arbitrators
experienced in business employment matters along with their resumes and fee
schedules.  Each party may strike all
names on the list it deems unacceptable. 
If more than one common name remains on the list of all parties, the
parties shall strike names alternately until only one remains.  The party who did not initiate the claim
shall strike first.  If no common name
remains on the lists of the parties, the Tribunal shall furnish an additional
list or lists until an arbitrator is selected.

The arbitrator shall
interpret this Agreement, any applicable Company policy or rules and
regulations, any applicable substantive law (and the law of remedies, if
applicable) of the state in which the claim arose, or applicable federal
law.  In reaching his or her decision,
the arbitrator shall have no authority to change or modify any lawful Company
policy, rule or regulation, or this Agreement. 
The arbitrator, and not any federal, state or local court or agency,
shall have exclusive and broad authority to resolve any dispute relating to the
interpretation, applicability, enforceability or formation of this Agreement,
including but not limited to, any claim that all or any part of this Agreement
is voidable.

The arbitration shall be
conducted pursuant to California Code of Civil Procedure Sections 1282 et. seq.

9.5.                    Claims Expenses; Legal Fees and
Expenses of Executive.                                         The Company shall advance and bear all reasonable
expenses of any arbitration conducted under this Section 9 and all reasonable
legal fees and expenses incurred by Claimant in pursuing a claim at and through
any stage of review or dispute resolution pursuant to this Section 9; provided,
however, that if it is finally determined that the Claimant did not
pursue the claim or commence the arbitration in good

faith and had no
reasonable basis therefore, the Claimant shall repay all of Claimant’s legal
fees and expenses advanced by the Company and shall reimburse the Company for
its reasonable legal fees and expenses in connection therewith (except that, in
any event, the Company shall be responsible for payment of the forum costs of
any arbitration hereunder, including the arbitrator’s fee).

Article 10.                                     Successors and Assignment

10.1.             Successors to the Company. 
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) of all or substantially all of
the business and/or assets of the Company or of any division or subsidiary
thereof (the business and/or assets of which constitute at least fifty percent
(50%) of the total business and/or assets of the Company) to expressly assume
and agree to perform the Company’s obligations under this Agreement in the same
manner and to the same extent that the Company would be required to perform
them if such succession had not taken place. 
Failure of the Company to obtain such assumption and agreement in a
written instrument prior to the effective date of any such succession shall be
a breach of this Agreement and shall entitle the Executive to compensation from
the Company in the same amount and on the same terms as they would be entitled
to hereunder if they had terminated their employment with the Company
voluntarily for Good Reason.  Except for
the purpose of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Executive’s Effective Date of
Termination if the Executive so elects, but any delay or failure by the
Executive to so elect shall not be a waiver or release of any rights hereunder
which may be asserted at any time.

10.2.             Assignment by the Executive. 
This Agreement shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees.  If the Executive dies while any amount would
still be payable to him hereunder had he continued to live, all such amounts,
unless otherwise provided herein, shall be paid to the Executive’s Beneficiary
in accordance with the terms of this Agreement. 
If the Executive has not named a Beneficiary, then such amounts shall be
paid to the Executive’s devisee, legatee, or other designee, or if there is no
such designee, to the Executive’s estate.

Article 11.                                     Miscellaneous

11.1.             Employment Status. 
Except as may be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is “at
will,” and, prior to the effective date of a Change in Control, may be
terminated by either the Executive or the Company at any time, subject to
applicable law.

11.2.             Beneficiaries. 
The Executive may designate one or more persons or entities as the
primary and/or contingent Beneficiaries of any Severance Benefits owing to the
Executive under this Agreement.  The
Executive may make or change such designation at any time, provided that
any designation or change thereto must be in the form of a signed writing
acceptable to and received by the Committee.

11.3.             Gender and Number. 
Except where otherwise indicated by the context, any masculine term used
herein also shall include the feminine, the plural shall include the singular,
and the singular shall include the plural.

11.4.             Severability. 
In the event any provision of this Agreement shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of this Agreement, and this Agreement shall be construed and
enforced as if the illegal or invalid provision had not been included.  Further, the captions of this Agreement are
not part of the provisions hereof and shall have no force and effect.

11.5.             Modification. 
Except as expressly provided in Section 3(r) with respect to certain
waivers of circumstances that would otherwise constitute Good Reason, no
provision of this Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to in writing and signed by the
Executive and by an authorized member of the Committee or its designee, or by
the respective parties’ legal representatives and successors.

11.6.             Notice. 
For purposes of this Agreement, notices, including a Notice of
Termination, and all other communications provided for in this Agreement shall
be in writing and shall be deemed to have been duly given when delivered or on
the date stamped as received by the U.S. Postal Service for delivery by
certified or registered mail, postage prepaid and addressed: (i) if to the
Executive, to his latest address as reflected on the records of the Company,
and (ii) if to the Company: Power-One, Inc., 740 Calle Plano, Camarillo,
California 93012, Attn: Corporate Secretary, or to such other address as the
Company may furnish to the Executive in writing with specific reference to this
Agreement and the importance of the notice, except that notice of change of
address shall be effective only upon receipt.

11.7.             Applicable Law. 
To the extent not preempted by the laws of the United States, the laws
of the State of California shall be the controlling law in all matters relating
to this Agreement.  Any statutory
reference in this Agreement shall also be deemed to refer to all applicable
final rules and final regulations promulgated under or with respect to the
referenced statutory provision.

IN
WITNESS WHEREOF,
the parties have executed this Agreement on this                           
day of                                                ,
                 .

	
  Power-One, Inc.

  	
   

  	
  Executive

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
   

  	
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  Its:Exhibit
10.12

EMPLOYMENT
AGREEMENT

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

W I T N E S S E T H :

WHEREAS, POAMI and Executive agreed to employment
terms pursuant to a Change in Control Agreement dated December 13, 2000 and
amended such agreement under an Amendment to Change in Control Agreement dated
June 20, 2003 and a retention bonus letter dated June 20, 2003 (such Change in
Control 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) has
determined that it is in the best interest of the Company, its creditors and
its stockholders to assure that the Company will have the continued dedication
of Executive during and after the period of the Company’s and POAMI’s (as
defined in Section 1) anticipated Restructuring (as defined in Section 1) of
its indebtedness and capital stock notwithstanding the possibility or
occurrence of a Change in Control (as defined in Section 1), to provide
Executive with assurance of continued employment beyond the expiration of the
Prior Employment Agreement and to provide compensation and benefits
arrangements which are competitive with those of other comparable  and similarly situated corporations; and

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

WHEREAS, Executive has agreed to enter into this
Agreement because the Company has satisfied all of its obligations under the
Prior Employment Agreement; 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:

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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, as the case may be, whether prior to or after the Restructuring.

(b)           “Bonus Amount” means:

(A)          for
a Date of Termination occurring in fiscal year 2004, the average of the annual
incentive bonuses payable by the Company to or for the benefit of or deferred
by Executive for the 2002 and 2003 fiscal years of the Company; and

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

(c)           “Cause” means:

(A)          the
willful and continued failure of Executive to perform substantially his duties
with the Company (other than any such failure resulting from Executive’s
incapacity due to physical or mental illness or any such failure subsequent to
Executive being delivered a Notice of Termination without Cause by the Company
or Executive delivering a Notice of Termination for Good Reason to the Company)
that is not remedied within 30 days after a written demand for substantial
performance 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
he is guilty or Executive’s plea of nolo
contendre, in each case, with respect to a felony.

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

(d)           “Change in Control” means

(i)   the occurrence of any one
of the following events after the earlier of the date the Restructuring is
consummated or December 31, 2005:

(A)          individuals
who, as of the date the Restructuring is consummated, constitute the Board (or,
in the case no Restructuring is consummated by December 31, 2005, the
individuals 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 director
subsequent to the date the Restructuring is consummated (or, in the case no
Restructuring is consummated by December 31, 2005, December 31, 2005), whose election
or nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as a
nominee for director, without written objection to such nomination) or, prior
to the date that a Restructuring is consummated, as elected at any time by
Quadrangle Group shall be an Incumbent Director.

(B)           any
“person” (as such term is defined in Section 3(a)(9) of the Securities
Exchange Act of 1934 (the “Exchange Act”) and as used in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than thirty-three and one-third
percent (331/3%) of the combined voting power
of the Company’s then outstanding securities eligible to vote for the election
of the Board (the “Company Voting Securities”); provided, however, that the event described in this
paragraph (B) shall not be deemed to be a Change in Control if such
beneficial owner is any of the following or becomes a beneficial owner as a
result of any of the following:

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

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

(IV)         a person involved in a Non-Qualifying
Transaction (as defined in paragraph (C));

(V)           an entity (x) controlled by Executive
or a group of persons consisting, at the time of such acquisitions, of
Executive 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 such
acquisitions, is owned by Executive or a group of persons consisting of
Executive and other employees of the Company or any of its Subsidiaries; or

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

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

(C)           the
consummation of a merger, consolidation, statutory share exchange, sale of all
or substantially all of the assets of the Company or similar form of corporate
transaction (whether in one transaction or a series of transactions) involving
the Company (a “Business Combination”), unless immediately following such
Business Combination:

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

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

(III)         at least a majority of the members of the
board of directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) following the consummation of the
Business Combination were Incumbent Directors at the time of the Board’s
approval of the execution of the initial agreement providing for such Business
Combination (any Business Combination which satisfies all of the criteria
specified in (I), (II) and (III) above shall be deemed to be a “Non-Qualifying
Transaction”); or

(D)          the
Company substantially completes a plan of complete liquidation or dissolution
whether in one transaction or a series of transactions;

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

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

 4
 

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

(B)           the
consummation of a Business Combination, unless immediately following such
Business Combination:

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

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

(III)         at least a majority of the members of the
board of directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) following the consummation of the
Business Combination were Incumbent Directors at the time of the Board’s
approval of the execution of the initial agreement providing for such Business
Combination; or

(C)           the
Company substantially completes a plan of complete liquidation or dissolution
whether in one transaction or a series of transactions.

(iii)   the occurrence of any one
of the following events prior to the earlier of the date the Restructuring is
consummated or December 31, 2005:

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

 5
 

approved by a vote of at least two-thirds of the Incumbent Directors
then on the Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without written objection to such nomination) shall be an Incumbent
Director.

(B)           any “person” (as such term is defined in
Section 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 a
syndicate or group in which one or more Current Debt Holders beneficially own a
majority of the debt of the Company and POAMI beneficially owned by such
syndicate or group) is or becomes a “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act as if such rule applied to ownership of
debt), directly or indirectly, of more than thirty-three and one-third (331/3%) of the total debt of the Company and
POAMI;

(C)            any “person” (as such term is defined in
Section 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 a
syndicate or group in which one or more Current Debt Holders, collectively,
beneficially own a majority of the total voting power of the Company Voting
Securities beneficially owned by such syndicate or group) is or becomes a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than fifty percent
(50%) of the Company Voting Securities; or

(D)          the
consummation of a Business Combination, unless immediately following such
Business Combination:

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

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

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

 6
 

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

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

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

(f)            “Current Debt Holders” means
Quadrangle Group, Citicorp Group and MacKay Shields Group.

(g)           “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.

(h)           “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

 7
 

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

(i)            “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); or

(D)          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.

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.

(j)            “MacKay Group” means MacKay Shields,
LLC and any fund that is controlled by the foregoing and, as applicable, their
respective partners, members, subsidiaries and affiliates (including without
limitation, any other entities controlled by or under common control with such
entities), where the assets of each such partner, member, subsidiary or
affiliate primarily consist of Company Voting Securities and/or debt of the
Company or POAMI.

(k)           “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.

(l)            “Notice of Termination” means a
written notice of termination of employment given by one party to the other
party pursuant to Section 16(b).

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

 8
 

(n)           “Quadrangle Group” means Quadrangle
Group LLC, POI Acquisition I, Inc., POI Acquisition, LLC, Quadrangle Master
Funding Ltd., any fund that is controlled by the foregoing and, as applicable,
their respective partners, members, subsidiaries and affiliates (including
without limitation, any other entities controlled by or under common control
with such entities), where the assets of each such partner, member, subsidiary
or affiliate primarily consist of Company Voting Securities and/or debt of the
Company or POAMI.

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

(p)           “Restructuring” means shall mean any
transaction or series of transactions that effectuates any reorganization, recapitalization,
consolidation, business combination, merger, or other similar transaction or
any transaction that effectuates any material amendment to, or other material
change in, the Company’s or POAMI’s obligations or indebtedness for borrowed
money 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’s
revolving credit facility, 7.375% Senior Unsecured Notes due 2005 or 8.125%
Senior Subordinated Notes due 2009 or that modifies any material payment term
or any material financial or operating covenant or that provides for a
forbearance of any material payment obligation or material covenant, in each
case, such that an amount that otherwise would be due and payable (according to
its terms, by put, upon default and acceleration or otherwise) is delayed or
otherwise extended for at least twelve months or that converts a material
amount of the Company’s or POAMI’s obligations or indebtedness for borrowed
money as of the date hereof (including accrued or accreted interest thereon) to
equity and/or to a security junior to the claim’s existing priority or is
otherwise compromised, or any cash tender offer or any combination thereof; or
(ii) (A) any merger, consolidation, reorganization, recapitalization, business
combination or other transaction pursuant to which the Company is acquired by,
or combined with, any person, group of persons, partnership, corporation or
other entity other than a Current Debt Holder (an “Acquiror”) or (B) the
acquisition, directly or indirectly by an Acquiror (or by one or more persons
acting together with an Acquiror pursuant to a written agreement or otherwise),
in a single transaction or a series of transactions, of (x) all or a
preponderance of the assets or operations of the Company, or all or any
material portion of any operating division of the Company or (y) all,
substantially all, or a majority of the outstanding or newly issued shares of
the Company’s (or any of its Subsidiary’s) capital stock (or any securities
convertible into, or options, warrants or other rights to acquire such capital
stock); in each case, whether accomplished out-of-court or through the
confirmation of any plan of reorganization pursuant to Section 1129 of the
United States Bankruptcy Code, whether the requisite consents were obtained
in-court or out-of-court.

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

(r)            “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

 9
 

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.  The execution of this Agreement shall
constitute acceptance by Executive and the Company that Executive’s employment
shall not terminate as a result of any Change in Control prior to the date
hereof.  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 19.

(b)           Duties.  During the period of Executive’s employment
under this Agreement, Executive shall serve as Sr. Vice President Customer
Operations of the Company.  Executive
shall devote Executive’s full business time and attention to the affairs of the
Company and his duties as its Sr. Vice President Customer Operations.  Executive shall have such duties as are
appropriate to Executive’s position as Sr. Vice President Customer Operations,
will be responsible for planning, organizing, monitoring and directing customer
operations, ensuring that service levels, quality, productivity and financial
goals are achieved in a 24-hour environment, developing management staff to
oversee day to day operations 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 Chief Executive Officer and Board of Directors
of the Company.  Executive shall report
to the 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 his sole and absolute discretion.

3.             Term of Agreement.  The Term of this Agreement shall commence on
the date of this Agreement and shall continue until the earlier of (i) the
first anniversary of the date of this Agreement or (ii) the Date of
Termination that results from a Qualifying Termination or Non-Qualifying
Termination.  If this Agreement remains
in effect through the first anniversary of the date of this Agreement, it shall
thereafter be automatically extended for an indefinite number of one (1) year
periods unless either party sends written notice to the other party of its
intention not to renew at least thirty (30) days prior to expiration of said
Term.  If the election not to renew is
made, this Agreement shall remain in full force and effect for the remaining
original term and any extension periods thereafter if the original term has
been renewed.  The original term and any
renewal periods thereafter are hereinafter collectively referred to as the “Term.”  Certain obligations and benefits shall
survive the expiration of the Term as set forth in Section 19.

 10

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 One Hundred Seventy Five
Thousand and No/100 Dollars ($175,000.00), which shall be reviewed annually by
the Board or the Compensation Committee of the Board.  Executive’s Annual Base Salary shall be paid
in accordance with the standard practices for other senior corporate executives
of the Company.

(b)           Bonuses.  Executive shall be eligible to receive
annually or otherwise any bonus awards, whether payable in cash, shares of
common stock of the Company or otherwise, which the Company, the 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.

(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, sick leave, employee stock purchase
plans, car allowances, vacations and holidays, long-term disability, and such
other benefits as are or may be made available from time to time to senior
executives of the Company.  For purposes
of this Section 4(c), the term “the Company” shall also include
POAMI.   If there is a sale in an
underwritten public offering registered under the Securities Act of 1933, as
amended, of Company Voting Securities having an aggregate offering value of at
least $40 million, all of Executive’s Awards (as defined below) will fully
vest, all restrictions on such Awards shall lapse and the maximum level of
achievement of all performance criteria with respect to such Awards shall be
deemed fully satisfied.  In the case of
stock options or any other equity based Awards in the nature of a right that
may be exercised, such stock options and other equity based Awards shall remain
exercisable for three years after the Date of Termination.

(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.

 11
 

(f)            Retention Bonus.  Executive will receive two retention bonuses
each in an amount equal to 50% of Executive’s Annual Base Salary (with such
Annual Base Salary to be determined as of the date such bonus is paid) (“Retention
Bonus”).  The first retention bonus shall
be payable if he remains continuously employed by the Company from the date
hereof through the earlier of the date of the consummation of the Restructuring
or December 31, 2004 or, if prior to the consummation of the Restructuring or
such date, as applicable, (i) he is terminated by the Company other than for
Cause, (ii) he resigns his employment because of Good Reason or (iii) the
Company does not renew the Agreement upon expiration of the Term.  The second retention bonus shall be payable
if he remains continuously employed by the Company from the date hereof through
the 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, as
applicable, (i) he is terminated by the Company other than for Cause, (ii) he
resigns his employment because of Good Reason or (iii) the Company does not
renew the Agreement upon expiration of the Term.  Payment of any amount pursuant to this
paragraph shall not reduce any other payments or benefits to which Executive is
entitled under this Agreement.  Should
the Chief Executive Officer of the Company agree to forgo any portion of his
Retention Bonus for any reason at any time, Executive agrees to forgo the same
percentage of his Retention Bonus.

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.

 12
 

(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; provided, however, if a Notice of Termination is given by the
Company or Executive within four months prior to a Change in Control or one
year following a Change of Control, the Company shall pay Executive an
additional lump-sum cash payment equal to (x) .99 times Executive’s
highest Annual Base Salary during the 12-month period immediately prior to the
Date of Termination plus
(y) .99 times Executive’s Bonus Amount;

(C)           the
Company shall continue, for a period of one (1) year (or two (2) years in the
event Executive is entitled to payments under Sections 5(a)(B)(x) and (y))
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 he 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 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

 13
 

Gross-Up
Payment, after reduction for any federal, state and local income and employment
taxes on the Benefits Lump-Sum Payment and the Benefits Gross-Up Payment, shall
equal the Benefits Lump-Sum Payment. 
Notwithstanding the foregoing, in the event Executive becomes reemployed
with another employer and becomes eligible to receive benefits from such
employer, the benefits described herein shall be secondary to such benefits
during the period of Executive’s eligibility, but only to the extent that the
Company reimburses Executive for any increased cost and provides any additional
benefits necessary to give Executive the benefits provided hereunder; and

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

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

6.     Excise Tax
Gross Up.

(a)           Anything in this Agreement to the contrary
notwithstanding, in the event that it shall be determined that the vesting of
Awards, aggregate payments or distributions by the Company or its affiliated
companies to or for the benefit of Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise but determined without regard to any additional payments required
under this Section 6 (a “Payment”), constitute “parachute payments” (as such
term is defined under Section 280G of the Internal Revenue Code of 1986, as
amended (the “Code”) or any successor provision, and the regulations
promulgated thereunder (collectively, “Section 280G”)) the aggregate present
value of which equals or exceeds three times Executive’s “base amount” (as such
term is defined under Section 280G) and are therefore subject to the excise tax
imposed by Section 4999 of the Code or any successor provision (collectively, “Section
4999”) or any interest, penalties or additions to tax with respect to such
excise tax (the total excise tax, together with any interest, penalties or
additions to tax, are hereinafter collectively referred to as the “Excise Tax”)),
then Executive shall be entitled to receive an additional payment (a “Gross-Up
Payment”) 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 and
employment taxes and Excise Tax (and any interest and penalties imposed with
respect to any such taxes) imposed upon the Gross-Up Payment, Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.  Notwithstanding the foregoing,

 14
 

Executive agrees to reduce the aggregate amount of any Payments that
constitute “parachute payments” to the extent necessary so that such Payments
do 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 the
reduction necessary to cause such Payments not to equal or exceed three times
Executive’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, including
whether and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment 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 and
Executive within fifteen (15) business days of the receipt of notice from
Executive that there has been a Payment, or such earlier time as is requested
by the Company.  In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the change in control, Executive may appoint another
nationally recognized public accounting firm to make the determinations
required hereunder (which accounting firm shall then be deemed to be the
Accounting Firm hereunder).  All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by the
Company to Executive within five (5) days of the receipt of the Accounting Firm’s
determination (it being understood, however, that the Gross Up Payment may, if
permitted by law, be paid directly to the applicable taxing authorities).  If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall furnish Executive with a written
opinion that failure to report the Excise Tax on Executive’s applicable federal
income tax return would not result in the imposition of a negligence or similar
penalty.  Any determination by the
Accounting Firm shall be binding upon the Company and Executive.  As a result of the uncertainty in the
application of Section 4999 at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have 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 not
have been made (“Overpayment”), consistent with the calculations required to be
made hereunder.  In either such event,
the Accounting Firm shall determine the amount of the Underpayment or
Overpayment that has occurred.  In the
event that the Company exhausts its remedies pursuant to Section 6(c) and Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive.  In the case of an
Overpayment, Executive shall, at the direction and expense of the Company, take
such steps as are reasonably necessary (including, if reasonable, the filing of
returns and claims for refund), and otherwise reasonably cooperate with the Company
to correct such Overpayment; provided, however, that (i) Executive shall not in
any event be obligated to return to the Company an amount greater than the net
after-tax portion of the Overpayment that he has retained or has recovered as a
refund from the applicable taxing authorities and (ii) this provision shall be
interpreted in a manner consistent with the intent of Section 6(a) hereof to
make Executive whole, on an after-tax basis, from the application of Section
4999.

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

 15
 

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

(i)            give the Company any
information reasonably requested by the Company relating to such claim,

(ii)           take such action in
connection with contesting such claim as the Company shall reasonably request
in writing from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably selected by
the Company,

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

(iv)          permit the Company to
participate in any proceedings relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and expenses (including
additional interest, penalties or additions to tax) incurred in connection with
such contest and shall indemnify and hold Executive harmless, on an after-tax
basis, for any Excise Tax or income, employment or other tax (including
interest, penalties or additions to tax with respect thereto) imposed as a
result of such representation and payment of costs and expenses.  Without limitation on the foregoing provisions
of this Section 6(c) hereof, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided further, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such
payment to Executive on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income,
employment or other tax (including interest, penalties or additions to tax with
respect to any such taxes) imposed with respect to such advance or with respect
to any imputed income with respect to such advance; and provided further, that
any extension of the statute of limitations relating to payment of taxes for
the taxable year of Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount.  Furthermore, the Company’s control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Executive shall be entitled to settle or

 16
 

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

(d)           If, after the receipt
by Executive of an amount advanced by the Company pursuant to Section 6(c)
hereof, Executive becomes entitled to receive, and receives, any refund with
respect to such claim, Executive shall (subject to the Company’s complying with
the requirements of Section 6(c) hereof) promptly pay to the Company the amount
of such refund (together with any interest paid or credited thereon after taxes
applicable thereto).  If, after the
receipt 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 with
respect to such claim and the Company does not notify Executive in writing of
its intent to contest such denial of refund prior to the expiration of thirty
(30) days after such determination, then such advance shall be forgiven and
shall 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 the
services which he will perform for the Company are of a special and unique
nature, and that the Company would find it extremely difficult or impossible to
replace Executive.  Accordingly,
Executive agrees that, in consideration of this Agreement and the payments to
be received by him hereunder, from and after the date hereof through the period
during which Executive continues to be employed by the Company and following
termination of Executive’s employment for any reason until the first
anniversary (or the second anniversary in the event Executive is entitled to
payments 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 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., Honeywell
Security Monitoring, 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 7 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 7 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

 17
 

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 7 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 he has not already received.

8.             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 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 8 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

 18
 

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.

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

10.           Antidisparagement.

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

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

11.           Injunctive Relief.

(a)           Executive acknowledges that a breach of the
undertakings in Sections 7, 8, 9 or 10(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

 19
 

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 7,
8, 9 or 10(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 10(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 10(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.

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

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

14.           Scope of Agreement.  Nothing in this Agreement shall be deemed to
entitle Executive to continued employment with the Company or its Subsidiaries
or shall require Executive to continue the employment relationship against his
wishes; provided, however, that any termination
of Executive’s employment during the Term of this Agreement shall be subject to
all of the provisions of this Agreement as provided in Section 19.

15.           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

 20
 

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 15(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 15(a) or that otherwise become bound by the
terms 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 assets
that 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 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.

16.           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:                                  Joseph R. Sanchez

3115 Pepper Ridge

Wichita, KS  67025

If to the Company:                           Protection One, Inc.

818 S. Kansas Avenue

Topeka, KS  66612

Attention:  General Counsel

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.

 21
 

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

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

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

20.           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.

21.           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.

22.           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,

 22
 

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

23.           No Mitigation.  The amounts payable to Executive upon any
termination of his employment shall be considered severance pay in
consideration of past services rendered on behalf of the Company and his
continued service from the date hereof to the date he 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 his
employment.  Executive shall have no duty
to mitigate his 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.

24.             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.

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

*   *  
*   *   *

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

 23

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:

  	
  /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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