Document:

Exhibit 10.2

Grant  Agreement

As a condition of being selected as a Participant in
the Protection One, Inc. Stock Appreciation Rights Plan (the “Plan”),
I agree to be bound by the terms of the Plan and to accept the decisions of the
Committee taken in accordance with such terms. 
Except as otherwise required by law or with the express prior written
consent of the Committee, I agree to keep the existence and terms of this Plan,
and the amount of my award, strictly confidential.  I further agree that the benefits, if any,
that are paid or payable under the Plan shall in no event be taken into account
for purposes of determining the amount of any severance or similar benefit to
which I may be entitled under my employment agreement, or any other plan,
agreement or practice of the Company, regardless of the date of implementation.

Notwithstanding any other provisions of the Plan to
the contrary, including, without limitation, the provisions contained in
Section 5 (“Adjustment of the Base Price”) of the Plan, the Base Price of
twenty-two percent (22%) of the SARs awarded to me pursuant to this agreement
shall be fixed at a value equal to the initial Base Price increased by the
Preferred Return through and including May 12, 2006 and shall not be subject to
further increase.  Such fixed Base Price
shall be calculated by multiplying (i) $4.50 by (ii) 1.09 ^ (1+n/365) where n
is equal to the number of days that have elapsed between February 8, 2006 and
the date set forth in the immediately preceding sentence.

Unless otherwise stated herein, all capitalized terms
in this agreement have the meanings ascribed to them in the Plan.

Grant Date:

Number of SARs Awarded(1):

	
  

  	
  Agreed and Accepted by

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  PROTECTION ONE, INC

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
  Print Name: 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
											

 

 

 

 

 

(1) Reflects portion of previously forfeited SARs that have been reallocated
to Participant pursuant to the terms of Section 3(a) of the Plan. Except as
otherwise specified above, the Base Price of the SARs is increased by the
Preferred Return from the Closing Date through the date, and in the manner,
specified in the Plan.EXHIBIT 10.1

Memorandum
of Understanding

This Memorandum of
Understanding (“MOU”) is entered into and is effective as of 11 Nov. 2006,
between Stewart & Stevenson Tactical Vehicle Systems LP d/b/a Tactical
Vehicle Systems, a Division of Armor Holdings, Inc., (“TVSLP”) and Force
Protection Inc., (“FPI”), Individually, a “Party” and collectively, the “Parties.”

Whereas FPI is a
new business which has designed and produced a mine-protected and armored
vehicle called the Cougar;

Whereas the
Government requires additional Cougar vehicles;

Whereas FPI has
limited capacity to meet these requirements and needs industry assistance in
the production of FPI’s Cougar vehicles;

Whereas TVSLP has
recognized capability in combat vehicle systems integration, to include
production expertise, and has available capacity for automotive integration and
final assembly; and

                Whereas,
TVSLP and FPI intend to establish a relationship where FPI will be the Prime
and TVSLP with be the Subcontractor, for automotive integration and final
assembly of two hundred (200) variants of the Cougar vehicle (“Work”).

Therefore, TVSLP
and FPI to the extent allowed by applicable law and regulations, agree to the
following:

1.             Subcontractor Relationship

The Parties agree to negotiate a subcontract agreement for fabrication
of the Cougar structures in accordance with the attached Term Sheet (Attachment
A).

2.                                     Term
and Conditions

The terms and conditions of the subcontract agreement will be mutually
agreed upon by the parties for the Work which will be substantially similar to
the attached form of subcontract (Attachment B).

3.                                       Expenses

Each of the Parties will bear all expenses incurred by it or on its
behalf in connection with its actions pursuant to this MOU.

4.                                       Assignment

Neither Party may assign or delegate to a third party (including but
not limited to any successor in interest to either Party as the result of a
merger, sale or acquisition of all or substantially all of the assets or stock
of either Party) such Party’s rights or obligations in connection with this MOU
without the written consent of the other Party.

5.                                     Severability

This MOU will be interpreted in such manner as to be effective and
valid under any applicable law and/or regulation, but if any provision of this
MOU is held to be prohibited by or invalid under any applicable law and/or
regulation, such provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this MOU.

 

 

6.                                       Entire
Agreement

This MOU constitutes the entire agreement between the Parties with
respect to the subject matter hereof, and supercedes any prior understandings,
agreements or representations by or between the Parties, written or oral, that
may have related in any way to the subject matter hereof.

7.                                     Life
of the Agreement

This MOU shall be effective from the date of the last signature
below.  The life of the agreement will be
for five (5) years with an option to renew upon mutual agreement of the
parties. The MOU may be terminated by either party upon ninety (90) days
written notice.

8.                                     Confidentiality
and Intellectual Property

The Parties agree to abide by the confidentiality agreement dated
September 2006. FPI shall at all times retain the sole and exclusive rights to
the design of the Cougar vehicles or any of its derivatives or improvements,
and the design, bill of materials, drawings, work instructions, transition to
production plans, and technical data package relating to the Cougar vehicles
whether provided by FPI, developed by TVSLP from FPI information or the Work or
developed by FPI and TVSLP jointly (“Intellectual Property”) provided, however,
TVSLP shall own any production processes and knowhow developed by TVSLP in the
performance of the Work and FPI shall have the limited right to use such
processes solely for the Work and not for use by a 3rd party.  TVSLP agrees to implement a firewall
procedure, acceptable to FPI, with respect to FPI Confidential Information and
Intellectual Property to prevent disclosures to other corporations, divisions,
affiliates, contractors or consultants to TVSLP.

9.                                       Public
Relations Clause

Any news release, public announcement, advertisement, or other
publicity to be released by a party in connection with this MOU must first have
the prior written approval of the other party, which approval shall not be
unreasonably withheld.

10.                                 Limitation
of Liability

EXCEPT AS SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES AND EACH
PARTY HEREBY SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS
OR IMPLIED, REGARDING THE PRODUCTS AND SERVICES CONTEMPLATED BY THIS AGREEMENT,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTIBILITY, NON-INFRINGEMENT, OR FITNESS
FOR A PARTICULAR PURPOSE.

NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL PUNITIVE OR EXEMPLARY DAMAGES, EVEN IF THAT PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES ARISING FROM ANY PROVISION OF
THIS AGREEMENT, SUCH AS, BUT NOT LIMITED TO, LOSS OF USE, INCOME OR PROFITS, OR
ANTICIPATED PROFITS OR LOST BUSINESS OR THE COSTS OF PROCUREMENT OF SUBSTITUTE
GOODS OR SERVICES.

11.           Dispute Resolution

All claims, disputes controversies, or other matter in question arising
out of, connected with, or relating to the Agreement that cannot be resolved by
the Parties through face to face negotiations between senior executives of each
Party, will be settled by binding arbitration in accordance with the Commercial
Rules of the American Arbitration Association then in effect.  All arbitration proceedings will be held in
New York. The administrative costs of any arbitration or litigation will be
borne equally by the Parties pending the arbitrator’s award.  The arbitrator shall be bound by the express
provisions set forth in this agreement and shall not modify any terms of this
agreement or make any award of damages in excess of the amounts set forth in
this agreement or grant any relief not expressly set forth in this
agreement.  The determinations of the
arbitrator shall be final and, except as provided by law, shall not be subject
to judicial review.  Any court of
competent jurisdiction may enforce any award or determination rendered by the
arbitrator.  The language to be used in
the arbitral proceedings shall be English. 
The arbitrator shall not have the authority to award consequential
damages of any sort (which are 

 

defined to include, without limitation, damages for lost profits,
damages for delay, damages for lost opportunities and the like) or punitive
exemplary damages of any sort.  This
Agreement shall be construed and enforced in accordance with, and governed by,
the laws of the State of New York without regard to its conflict of law
principles.

In Witness Whereof, the Parties have executed this MOU

	
  Stewart & Stevenson
  Tactical Vehicle

  	
   

  	
  Force Protection, Inc.

  
	
  Systems LP d/b/a
  Tactical Vehicle Systems,

  	
   

  	
   

  
	
  a Division of
  Armor Holdings, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Richard C.
  Hammond

  	
   

  	
  /s/ Raymond W. Pollard

  
	
  Name: Richard C.
  Hammond

  	
   

  	
  Name: Raymond W. Pollard

  
	
  Title: SVP,
  General Manager

  	
   

  	
  Title: COO

  
	
  Date: November
  10, 2006

  	
   

  	
  Date: November 10, 2006

  

 

Attachment
A:  Term Sheet

TVSLP/FPI
Subcontractor Relationship for Cougar Production

TVSLP Scope

1)                                    Exclusively
for a minimum of two hundred (200) Cougar variants TVSLP intend to provide
automotive integration and final assembly and deliver to and FPI designated
location.

2)                                    TVSLP
will buy all material and services and manage the supply chain for TVSLP’entire
content. Alternatively, upon mutual agreement, FPI may buy all material, manage
the supply chain and provide to TVSLP.

3)                                    Price
lead-time and delivery schedules will be mutually agreed at the time of
negotiation of the subcontract.

4)                                    Respond
to an RFQ for the Work.

5)                                    Tear
down and rebuild a Cougar vehicle provided by FPI, develop and provide FPI with
electrical schematics, assembly drawings, fluid/fuel and pneumatic schematics
and work instructions for Automotive Integration and Final Assembly.

FPI SCOPE

1)                                    Provide
TVSLP with the Confidential Information and Intellectual Property associated
with the automotive integration and final assembly of the Cougar vehicle to be
fabricated by TVSLP.

2)                                    Provide
TVSLP with a Cougar vehicle.

3)                                    Provide
TVSLP with an RFQ for the Work.

Other Conditions of this Agreement

1)                                    TVSLP
will not use any of FPI’s Confidential Information or Intellectual Property
except for performance of the Work.

Not Included in this Agreement

1)                                    Capsule
Fabrication, Automotive Integration and Final assembly of Buffalo, Mastiff or
Cheetah

2)                                    Cougar
and its variants service and support work.

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