Document:

Exhibit
10.1

 

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 Richard
Ginsburg (“Executive”).

 

W I T N E S S E T H :

 

WHEREAS, the
Company and Executive entered into an Employment Agreement dated as of
April 16, 2001 and amended that agreement by instruments dated
November 19, 2002 and March 18, 2003 (such agreement as so amended
being hereinafter referred to as the “Prior Employment Agreement”); and

 

WHEREAS, the Board
(as defined in Section 1) has determined that it is in the best interest of the
Company, 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
such term is 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, including without
limitation, the making of payments upon the change in control of the Company on
February 17, 2004; and

 

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

 

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

 

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

 

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

 

 

(a)              “Board”
means the Board of Directors of the Company, 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 or the Chairman of the
Compensation Committee 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 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 

 

2

 

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 (33 1/3%) 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 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 

 

3

 

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 (33 1/3%) 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 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 

 

4

 

more than
thirty-three and one-third percent (33 1/3%) 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 (33 1/3%) 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 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.

 

5

 

(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 (33 1/3%) 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 (33
1/3%) 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.

 

6

 

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 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:

 

7

 

(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
or not being nominated, elected or continuing as a director of the Board;

 

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

 

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

 

(E)  failure to provide
Executive, beginning upon consummation of the Restructuring, with participation
under a long-term equity incentive plan (with terms, including vesting, that
are competitive with companies of similar size and similar circumstances and
reasonably acceptable to Executive) ;

 

(F)  the appointment by the Board
of a Chief Operating Officer, Chief Financial Officer or President of the
Company over Executive’s written objection;

 

(G)  the resignation by Executive
for any reason during the 30 day period beginning six months after (i) the
occurrence of a Change in Control described in Section 1(d)(ii) or (ii)
the occurrence of a Change in Control described in Section 1(d)(iii)

 

(H)  the resignation by Executive
for any reason during the 30 day period beginning on December 31, 2005, if
a Restructuring is not consummated by such date;

 

(I)  the relocation by the
Company of Executive’s principal workplace locations more than 25 miles from
those workplace locations principally used by Executive as of the date hereof
(including without limitation, the Company’s Miami branch);

 

(J)  causing or permitting
(without the consent of Executive) any person other than Executive to present
and recommend the business plan to the Board;

 

(K)  subject to restrictions
under the bylaws of the Company as of the date hereof, reducing the hiring or
firing authority of Executive as in effect as of the date hereof (it being
understood, however, that Executive’s shall consult and collaborate with 

 

8

 

the Board prior to
the hiring or firing of any senior manager of the Company or any Subsidiary);

 

(L)           the
appointment of a Chairman of the Board (other than a Chairman who is not an
executive or an officer of the Company) without Executive’s consent; or

 

(M)         failure by
the Company to comply with Section 25 (Indemnification of Prior Payments)
within 60 days of Executive’s written request for the Company’s compliance with
Section 25.

 

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) (other than under Sections (i)(G) and (i)(H) in which case such
notice must be provided within the 30 day period after (x) December 31,
2005 or (y) six months after a Change in Control, as applicable) 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.

 

(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.

 

9

 

(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 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 

 

10

 

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

 

3.                   Term
of Agreement.  The Term of this
Agreement shall commence on the date of this Agreement and shall continue until
the earlier of (i) the second 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 second 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.

 

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 Four Hundred Fifty Thousand and No/100 Dollars ($450,000.00), 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 

 

11

 

Executive shall participate under a short-term incentive plan (subject
to its terms which shall be reasonably determined by the Board and based on
targets that are reasonably attainable) each year with a target bonus of not
less than 60% of base salary and
a potential to earn at least 100%
of base salary.  Executive acknowledges
that he received a pro-rata portion of the 2004 annual bonus for the period of
January 1, 2004 through February 17, 2004.  The bonus payable to Executive, if any, under
the short-term incentive plan with respect to 2004 shall be calculated in
accordance with the respective plan and shall take into account a pro-ration based
on the number of days from February 17, 2004 through December 31,
2004 (i.e., 318/366)  Company shall
provide Executive with participation under a long-term equity incentive plan
(with terms that are competitive with companies of similar size and similar
circumstances and reasonably acceptable to Executive) upon consummation of the
Restructuring.

 

(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, provided Executive
properly accounts therefor in accordance with the Company’s policies. During
the period of Executive’s employment under this Agreement, Executive shall also
be entitled to such other perquisites as are customary for senior executives of
the Company.  The parties hereto
acknowledge that Executive’s employment will entail substantial travel away
from Executive’s residence and that Executive’s reimbursable business expenses
will include reasonable travel expenses, including without limitation,
reasonable costs of air travel (including use of American Airlines AAirpass or
equivalent) and other transportation, weekly travel to and from Florida,
parking, rental cars, hotel accommodations and meals incurred with respect to travel
to and from his residence and any of the Company’s facilities outside of
Miami-Dade County and Broward County, Florida and other travel associated with
the performance of his duties hereunder. 
If it is determined by the Company that any portion of the Company’s
reimbursement of the travel expenses described in the preceding sentence
constitutes taxable wages for federal income and/or employment tax purposes,
the Company agrees to pay Executive an additional amount (the “Gross-Up
Payment”) such that the net amount retained by Executive from the amount of the
travel expenses reimbursed pursuant to the preceding sentence

 

12

 

(the
“Travel Reimbursement”) and the Gross-Up Payment, after reduction for any federal,
state and local income and employment taxes on the Travel Reimbursement and the
Gross-Up Payment, shall equal the Travel Reimbursement.  For purposes of determining the Gross-Up
Payment, Executive shall be deemed to pay Federal income taxes at the highest
marginal rate of Federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation to which such payment could be subject based upon the
state and locality of Executive’s resident or employment, net of the maximum
deduction in Federal income taxes which could be obtained from deducting such
state and local taxes. The Company shall make a determination of the amount of
any employment taxes required on the Gross-Up Payment.

 

(e)              Office
and Services Furnished.  During the
period of Executive’s employment under this Agreement, the Company shall make
available to Executive office space at the Company’s headquarters (which is
currently located in Topeka, Kansas, but which may be relocated at the
discretion of the Company) or the Company’s Miami branch, to the extent needed
while he is at the Company’s headquarters or Miami branch, secretarial
assistance and such other facilities and services as shall be suitable to
Executive’s position and adequate for the performance of Executive’s duties
hereunder.  During the period of
Executive’s employment under this Agreement, the Company shall install and
maintain, at its expense, a broadband (cable modem or DSL) connection at his
home for the use of Executive in connection with the performance of his duties
hereunder.  Executive shall not be
required to be in the Company’s headquarters except as he may determine
necessary for him to effectively carry out the duties contemplated by this
Agreement.

 

(f)                Retention
Bonus.  Executive will receive two
retention bonuses each in an amount equal to 75% 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.

 

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

 

13

 

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

 

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

 

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

 

(IV)                            a
pro rata portion of Executive’s annual bonus for the fiscal year in which
the Date of Termination occurs (to the extent not previously paid) in an amount
at least equal to (1) Executive’s Bonus Amount multiplied by a fraction,
the numerator of which is the number of days in a fiscal year in which the Date
of Termination occurs through the Date of Termination and the denominator of
which is three hundred sixty-five (365), and reduced by (2) any amounts
paid to Executive from the Company’s annual incentive plan for the fiscal year
in which the Date of Termination occurs; and

 

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

 

(B)  within five (5) business
days following the Date of Termination, the Company shall pay to Executive a cash
lump-sum equal to the sum of 2.0 times Executive’s highest Annual Base Salary
during the 12-month period immediately prior to the Date of Termination, plus 2.0 times 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 three (3) years 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 

 

14

 

providing copies
of medical records and other information required by any provider of such
Continued Benefit Plan and undergoing one or more physical examinations.  If the Company elects to provide Executive
with the Benefits Lump-Sum Payment, the Company shall notify Executive of its
intention to make this election not later than 90 days prior to the date
on which Executive’s coverage under existing benefit plans will expire, and if,
within 60 days after Executive receives such notification from the Company,
Executive presents the Company with one or more benefit plans that Executive
has obtained or intends to obtain that provide benefits on a substantially
similar basis as the benefits provided to Executive prior to the Date of
Termination (and acknowledgment from the provider of such benefit plans that
such benefit plans have been or can be obtained by Executive on those terms,
including, without limitation, at least substantially similar scope of
coverage, substantially similar deductibles and substantially similar
co-payments), then the Benefits Lump-Sum Payment shall be made based on the
premiums plus any other administrative fees (except co-payments) charged by the
Company offering such plans.  If the
Company elects to provide Executive with the Benefits Lump-Sum Payment and it
is determined by the Company that any portion of the Benefits Lump-Sum Payment
constitutes taxable wages for federal income and/or employment tax purposes,
the Company agrees to pay Executive an additional amount (the “Benefits Gross-Up
Payment”) such that the net amount retained by Executive from the Benefit
Lump-Sum Payment and the Benefits Gross-Up Payment, after reduction for any
federal, state and local income and employment taxes on the Benefits Lump-Sum
Payment and the Benefits Gross-Up Payment, shall equal the Benefits Lump-Sum
Payment.  Notwithstanding the foregoing,
in the event Executive becomes reemployed with another employer and becomes
eligible to receive benefits from such employer, the benefits described herein
shall be secondary to such benefits during the period of Executive’s
eligibility, but only to the extent that the Company reimburses Executive for
any increased cost and provides any additional benefits necessary to give
Executive the benefits provided hereunder; and 

 

(D)  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.

 

15

 

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, 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 

 

16

 

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 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 

 

17

 

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
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 second
anniversary of such termination of employment (the “Non-Competition Period”),
Executive shall not, directly or indirectly, own, manage, operate, join,
control or participate in the ownership, management, operation or control of,
or be connected as a director, officer, employee, partner, lender, consultant
or otherwise (“Participate” or a “Participation”) with any Competitor (as
hereinafter defined), except with the Company’s prior written consent.  For 

 

18

 

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 Inc. and their respective subsidiaries, affiliates and
successors.  Nothing in this
section shall prohibit Executive from owning for investment purposes an
aggregate of up to 3% of the publicly traded securities of any corporation
listed on the New York Stock Exchange or American Stock Exchange or whose
securities are quoted on the NASDAQ National Market.  Notwithstanding anything which may be to the
contrary herein, (i) Executive shall not be required to cease Participation
in any business or organization which begins to compete with the Company
subsequent to the time Executive commences such Participation, provided that such business or
organization began to compete with the Company through no action, assistance, or
plan of Executive, (ii) Executive may continue to serve as a member of the
Board of Directors of Guardian International, Inc. and may continue to hold
shares in Guardian International, Inc., and (iii) following termination of
Executive’s employment with the Company for any reason, none of the
restrictions in this Section 7 shall apply to Executive’s Participation in
any capacity with Guardian International, Inc.

 

It is the desire
and intent of the parties that the provisions of this Section 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
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 

 

19

 

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 legislative body; provided,
however, that prior to disclosing any of the Confidential
Information to a court or other administrative or legislative body, Executive
shall promptly notify the Company so that the Company may seek a protective
order or other appropriate remedy.  The
provisions of this subsection (i) do not apply to Executive’s
Participation (as defined in Section 7) in any capacity with Guardian
International, Inc.

 

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

 

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
(a) solicitation of any person who was an employee of Guardian
International, Inc. as of April 16, 2001 and who becomes an employee of
the Company or any of its Subsidiaries or affiliates during the period of
Executive’s employment with the Company or any of its Subsidiaries or affiliates
and (b) solicitation by general advertising.

 

20

 

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 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 Florida for all purposes.

 

21

 

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 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.

 

22

 

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:

  	
  Richard Ginsburg

  
	
   

  	
  P.O. Box 800207

  
	
   

  	
  Miami, FL  33280

  
	
   

  	
   

  
	
  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.

 

17.             Full
Settlement; Resolution of Disputes. 
Subject to Section 25, 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.

 

23

 

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, 25, 26 and 27 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,
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.  Subject to
Section 25, 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.             Legal
Fees.  All legal fees of Paul
Hastings incurred by Executive in connection with negotiating this employment
agreement and in connection with the Restructuring within the scope of
engagement set forth in the letter of engagement between Executive and Paul
Hastings dated July 6, 2004 shall be paid by the Company.  

 

24

 

25.             Indemnification
of Prior Payments.  The Company
hereby agrees to defend (or reimburse Executive for reasonable costs of
defense), protect and indemnify Executive from and against any and all
liabilities, obligations, damages, judgments, claims, costs, expenses and
disbursements of any kind or nature whatsoever asserted against Executive in
any manner relating to or arising out of or in connection with any payments
(“Prior Payments”) previously paid to Executive, including, without limitation,
those payments resulting as of the change in control that occurred on
February 17, 2004, and any obligation of the Company to make such Prior
Payments contained in any employment agreement or other agreement shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of such Prior Payments or any part thereof is rescinded
or reduced in amounts or must otherwise be restored or returned to the Company
or its successors by Executive, whether as a “voidable preference,” “fraudulent
conveyance” or otherwise, all as though such payment or performance had not
been made (in whole or in part, as applicable). 
If any such Prior Payment, or any part thereof is rescinded, reduced,
restored or returned, the agreement and obligation to make such Prior Payments
shall be reinstated and the obligation to make such Prior Payment shall be
reduced only by such amount paid and not so rescinded, reduced, restored or
returned.  All obligations and amounts
payable pursuant to this Agreement, including those set forth in this
Section 25, shall, to the maximum extent permitted under law, constitute
administrative priority expenses pursuant to Bankruptcy Code Sections 503(b)
and 507(a)(1) of the Company’s estate in the event of a bankruptcy filing by or
against the Company.

 

26.             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.

 

27.             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.]

 

25

 

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/
  Ben M. Enis

  
	
   

  	
  Its:

  	
  Chairman
  of the Board

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROTECTION
  ONE ALARM MONITORING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ben M. Enis

  
	
   

  	
  Its:

  	
  Chairman
  of the Board

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  /Richard Ginsburg

  
	
   

  	
   

  	
  Richard
  GinsburgExhibit
10.2

 

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 Darius G.
Nevin (“Executive”).

 

W I T N E S S E T
H :

 

WHEREAS, the
Company and Executive entered into an Employment Agreement dated as of
April 16, 2001 and amended that agreement by instruments dated
November 19, 2002 and March 18, 2003 (such agreement as so amended
being hereinafter referred to as the “Prior Employment Agreement”); and

 

WHEREAS, the Board
(as defined in Section 1) has determined that it is in the best interest of the
Company, 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
such term is 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, including without
limitation, the making of payments upon the change in control of the Company on
February 17, 2004; and

 

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

 

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

 

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

 

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

 

 

(a)              “Board”
means the Board of Directors of the Company, 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 that any person
becoming a director subsequent to

 

2

 

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 (33 1/3%) 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 

 

3

 

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 (33 1/3%) 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 (33 1/3%) 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 (33 1/3%) 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 

 

5

 

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

 

(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 (33 1/3%) 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 (33
1/3%) 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 

 

7

 

physical or mental
illness, unless within 30 days after Notice of Termination is given to
Executive following such absence Executive shall have returned to the full-time
performance of Executive’s duties.

 

(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),

 

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

 

(E)  the resignation by
Executive for any reason during the 30 day period beginning six months after
(i) the occurrence of a Change in Control described in Section 1(d)(ii) or
(ii) the occurrence of a Change in Control described in Section 1(d)(iii)

 

(F)  the resignation by
Executive for any reason during the 30 day period beginning on
December 31, 2005, if a Restructuring is not consummated by such date;

 

(G)  the relocation by the
Company of Executive’s principal workplace locations more than 25 miles from
those workplace locations principally used by Executive as of the date hereof
(including without limitation, the Company’s Miami branch);

 

(H)  failure by the Company to
comply with Section 25 (Indemnification of Prior Payments) within 60 days
of Executive’s written request for the Company’s compliance with
Section 25.

 

8

 

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) (other than under
Sections (i)(E) and (i)(F) in which case such notice must be provided within
the 30 day period after (x) December 31, 2005 or (y) six months after a
Change in Control, as applicable) 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.

 

(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

 

9

 

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 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 Chief Financial Officer and
Executive Vice President of the Company. 
Executive shall devote Executive’s full business time and attention to
the affairs of the Company and his duties as its Chief Financial Officer and
Executive Vice President.  Executive
shall have

 

10

 

such duties as are
appropriate to Executive’s position as Chief Financial Officer and Executive
Vice President, and shall have such authority as required to enable Executive
to perform these duties.  Consistent
with the foregoing, Executive shall comply with all reasonable instructions of
the Chief Executive Officer and Board of Directors of the Company.  Executive shall report to the Chief
Executive Officer.  Executive may
continue to reside in the State of Florida or in any location that he wishes as
long as he is able to effectively carry out the duties contemplated by this
Agreement.  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 second 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 second 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.

 

4.                   Base
Salary and Benefits.

 

(a)              Base
Salary.  During the period of
Executive’s employment under this Agreement, the Company shall pay Executive an
annual base salary (“Annual Base Salary”) at an annual rate equal to not less
than Three Hundred Thousand and No/100 Dollars ($300,000.00), 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 with a target bonus of not less than 60% of base salary and a potential to
earn at least 100% of base
salary.  Executive acknowledges that he
received a pro-rata portion of the 2004 annual bonus for the period of
January 1, 2004 through February 17, 2004.  The bonus payable to Executive, if any, under the short-term
incentive plan with respect to 2004 shall be calculated in accordance with the
respective plan and shall take into account a pro-ration based on the number of
days from February 17, 2004 through December 31, 2004 (i.e.,
318/366)  Company shall provide
Executive with participation under a long-term equity incentive plan (with
terms that are

 

11

 

competitive with
companies of similar size and similar circumstances and reasonably acceptable
to Executive) upon consummation of the Restructuring.

 

(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, provided Executive
properly accounts therefor in accordance with the Company’s policies. During
the period of Executive’s employment under this Agreement, Executive shall also
be entitled to such other perquisites as are customary for senior executives of
the Company.  The parties hereto
acknowledge that Executive’s employment will entail substantial travel away
from Executive’s residence and that Executive’s reimbursable business expenses
will include reasonable travel expenses, including without limitation,
reasonable costs of air travel (including use of American Airlines AAirpass or
equivalent) and other transportation, weekly travel to and from Florida,
parking, rental cars, hotel accommodations and meals incurred with respect to travel
to and from his residence and any of the Company’s facilities outside of
Miami-Dade County and Broward County, Florida and other travel associated with
the performance of his duties hereunder. 
If it is determined by the Company that any portion of the Company’s
reimbursement of the travel expenses described in the preceding sentence
constitutes taxable wages for federal income and/or employment tax purposes,
the Company agrees to pay Executive an additional amount (the “Gross-Up
Payment”) such that the net amount retained by Executive from the amount of the
travel expenses reimbursed pursuant to the preceding sentence (the “Travel
Reimbursement”) and the Gross-Up Payment, after reduction for any federal,
state and local income and employment taxes on the Travel Reimbursement and the
Gross-Up Payment, shall equal the Travel Reimbursement.  For purposes of determining the Gross-Up
Payment, Executive shall be deemed to pay Federal income taxes at the highest
marginal rate of Federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation to which such payment could be subject based upon the
state and locality of Executive’s resident or employment, net of the maximum
deduction in Federal income taxes which could be obtained from deducting such
state

 

12

 

and local taxes. The
Company shall make a determination of the amount of any employment taxes
required on the Gross-Up Payment.

 

(e)              Office
and Services Furnished.  During the
period of Executive’s employment under this Agreement, the Company shall make
available to Executive office space at the Company’s headquarters (which is
currently located in Topeka, Kansas, but which may be relocated at the
discretion of the Company) or the Company’s Miami branch, to the extent needed
while he is at the Company’s headquarters or Miami branch, secretarial
assistance and such other facilities and services as shall be suitable to
Executive’s position and adequate for the performance of Executive’s duties
hereunder.  During the period of
Executive’s employment under this Agreement, the Company shall install and
maintain, at its expense, a broadband (cable modem or DSL) connection at his
home for the use of Executive in connection with the performance of his duties
hereunder.  Executive shall not be
required to be in the Company’s headquarters except as he may determine
necessary for him to effectively carry out the duties contemplated by this
Agreement.

 

(f)                Retention
Bonus.  Executive will receive two
retention bonuses each in an amount equal to 72.5% 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);

 

13

 

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

 

(IV)                            a
pro rata portion of Executive’s annual bonus for the fiscal year in which
the Date of Termination occurs (to the extent not previously paid) in an amount
at least equal to (1) Executive’s Bonus Amount multiplied by a fraction,
the numerator of which is the number of days in a fiscal year in which the Date
of Termination occurs through the Date of Termination and the denominator of
which is three hundred sixty-five (365), and reduced by (2) any amounts
paid to Executive from the Company’s annual incentive plan for the fiscal year
in which the Date of Termination occurs; and

 

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

 

(B)  within five (5) business
days following the Date of Termination, the Company shall pay to Executive a
cash lump-sum equal to the sum of 2.0 times Executive's highest Annual Base
Salary during the 12﷓month period immediately prior to the Date of
Termination, plus 2.0 times 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 three (3) years 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 

 

14

 

to make this election
not later than 90 days prior to the date on which Executive’s coverage
under existing benefit plans will expire, and if, within 60 days after
Executive receives such notification from the Company, Executive presents the
Company with one or more benefit plans that Executive has obtained or intends
to obtain that provide benefits on a substantially similar basis as the
benefits provided to Executive prior to the Date of Termination (and
acknowledgment from the provider of such benefit plans that such benefit plans
have been or can be obtained by Executive on those terms, including, without
limitation, at least substantially similar scope of coverage, substantially
similar deductibles and substantially similar co-payments), then the Benefits
Lump-Sum Payment shall be made based on the premiums plus any other
administrative fees (except co-payments) charged by the Company offering such
plans.  If the Company elects to provide
Executive with the Benefits Lump-Sum Payment and it is determined by the
Company that any portion of the Benefits Lump-Sum Payment constitutes taxable
wages for federal income and/or employment tax purposes, the Company agrees to
pay Executive an additional amount (the “Benefits Gross-Up Payment”) such that
the net amount retained by Executive from the Benefit Lump-Sum Payment and the
Benefits Gross-Up Payment, after reduction for any federal, state and local
income and employment taxes on the Benefits Lump-Sum Payment and the Benefits
Gross-Up Payment, shall equal the Benefits Lump-Sum Payment.  Notwithstanding the foregoing, in the event
Executive becomes reemployed with another employer and becomes eligible to
receive benefits from such employer, the benefits described herein shall be
secondary to such benefits during the period of Executive’s eligibility, but
only to the extent that the Company reimburses Executive for any increased cost
and provides any additional benefits necessary to give Executive the benefits
provided hereunder; and 

 

(D)  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.

 

15

 

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, 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

 

16

 

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 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,

 

17

 

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 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 second
anniversary of such termination of employment (the “Non-Competition Period”),
Executive shall not, directly or indirectly, own, manage, operate, join,
control or participate in the ownership, management, operation or control of,
or be connected as a director, officer,

 

18

 

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 Inc.
and their respective subsidiaries, affiliates and successors.  Nothing in this section shall prohibit
Executive from owning for investment purposes an aggregate of up to 3% of the
publicly traded securities of any corporation listed on the New York Stock
Exchange or American Stock Exchange or whose securities are quoted on the
NASDAQ National Market.  Notwithstanding
anything which may be to the contrary herein, (i) Executive shall not be
required to cease Participation in any business or organization which begins to
compete with the Company subsequent to the time Executive commences such
Participation, provided that such
business or organization began to compete with the Company through no action,
assistance, or plan of Executive, (ii) Executive may continue to serve as
a member of the Board of Directors of Guardian International, Inc. and may
continue to hold shares in Guardian International, Inc., and
(iii) following termination of Executive’s employment with the Company for
any reason, none of the restrictions in this Section 7 shall apply to
Executive’s Participation in any capacity with Guardian International, Inc.

 

It is the desire
and intent of the parties that the provisions of this Section 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
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”);

 

19

 

(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 legislative body; provided,
however, that prior to disclosing any of the Confidential
Information to a court or other administrative or legislative body, Executive
shall promptly notify the Company so that the Company may seek a protective
order or other appropriate remedy.  The
provisions of this subsection (i) do not apply to Executive’s
Participation (as defined in Section 7) in any capacity with Guardian
International, Inc.

 

(B)  Executive agrees to return
all computer hardware and all Confidential Information, including all
photocopies, extracts and summaries thereof, and any such information stored
electronically on tapes, computer disks or in any other manner to the Company
at any time upon request of the Chairman of the Board 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
(a) solicitation of any person who was an employee of Guardian
International, Inc. as of April 16, 2001 and who becomes an employee of
the Company or any of its Subsidiaries or affiliates during the period of
Executive’s employment with the Company or any of its Subsidiaries or
affiliates and (b) solicitation by general advertising.

 

20

 

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 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 Florida for all purposes.

 

21

 

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 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.

 

22

 

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:

  	
  Darius G. Nevin

  
	
   

  	
  1410 Palancia
  Avenue

  
	
   

  	
  Coral Gables, FL
  33146

  
	
   

  	
   

  
	
  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.

 

17.             Full
Settlement; Resolution of Disputes. 
Subject to Section 25, 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.

 

23

 

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, 25, 26 and 27 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, 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.  Subject to
Section 25, 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.             Legal
Fees.  All legal fees of Paul
Hastings incurred by Executive in connection with negotiating this employment
agreement and in connection with the Restructuring within the scope of
engagement set forth in the letter of engagement between Executive and Paul
Hastings dated July 6, 2004 shall be paid by the Company.  

 

24

 

25.             Indemnification
of Prior Payments.  The Company
hereby agrees to defend (or reimburse Executive for reasonable costs of
defense), protect and indemnify Executive from and against any and all
liabilities, obligations, damages, judgments, claims, costs, expenses and
disbursements of any kind or nature whatsoever asserted against Executive in
any manner relating to or arising out of or in connection with any payments
(“Prior Payments”) previously paid to Executive, including, without limitation,
those payments resulting as of the change in control that occurred on
February 17, 2004, and any obligation of the Company to make such Prior
Payments contained in any employment agreement or other agreement shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of such Prior Payments or any part thereof is rescinded
or reduced in amounts or must otherwise be restored or returned to the Company
or its successors by Executive, whether as a “voidable preference,” “fraudulent
conveyance” or otherwise, all as though such payment or performance had not
been made (in whole or in part, as applicable).  If any such Prior Payment, or any part thereof is rescinded,
reduced, restored or returned, the agreement and obligation to make such Prior
Payments shall be reinstated and the obligation to make such Prior Payment
shall be reduced only by such amount paid and not so rescinded, reduced,
restored or returned.  All obligations
and amounts payable pursuant to this Agreement, including those set forth in
this Section 25, shall, to the maximum extent permitted under law,
constitute administrative priority expenses pursuant to Bankruptcy Code
Sections 503(b) and 507(a)(1) of the Company’s estate in the event of a
bankruptcy filing by or against the Company.

 

26.             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.

 

27.             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.]

 

25

 

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/
  Ben M. Enis

  
	
   

  	
  Its:

  	
  Chairman
  of the Board

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROTECTION
  ONE ALARM MONITORING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ben M. Enis

  
	
   

  	
  Its:

  	
  Chairman
  of the Board

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Darius G. Nevin

  
	
   

  	
   

  	
    Darius
  G. Nevin

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