Exhibit 10.1
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT (the
“Agreement”) is entered into as of the 8th day of
March, 2007, by and between Protection One, Inc., a Delaware
corporation (the “Company”), Protection One Alarm
Monitoring, Inc., a Delaware corporation (“POAMI”), and
Kimberly G. Lessner (“Executive”).
W I T N E S S E T
H :
WHEREAS, the Board (as defined in
Section 1) has determined that it is in the best interest of
the Company, its creditors and its stockholders to employ Executive
and to provide Executive compensation and benefits arrangements
which are competitive with those of other comparable and similarly
situated corporations; and
WHEREAS, POAMI is a direct and
wholly owned subsidiary of the Company and will receive substantial
direct and indirect value from Executive; and
WHEREAS, each of the board of
directors of the Company and of POAMI has authorized the Company
and POAMI, respectively, to enter into this Agreement.
NOW, THEREFORE, for and in
consideration of the premises and the mutual covenants and
agreements herein contained, the Company, POAMI and Executive
hereby agree as follows:
1.
Definitions
. As used
in this Agreement, the following terms shall have the respective
meanings set forth below:
(a)
“
Board ” means the Board of Directors of the
Company.
(b)
“ Bonus
Amount ” means:
(A)
for a Date of
Termination occurring in fiscal year 2008, the annual incentive
bonuses payable by the Company to or for the benefit of or deferred
by Executive for the 2007 fiscal year of the Company;
and
(B)
for a Date of
Termination occurring in fiscal year 2009, the average of the
annual incentive bonuses payable by the Company to or for the
benefit of or deferred by Executive for the 2007 and 2008 fiscal
years of the Company; and
(C)
for a Date of
Termination occurring after fiscal year 2009, the average of the
annual incentive bonuses payable by the Company to or for the
benefit of or deferred by Executive for the last three (3)
completed fiscal years of the Company immediately preceding the
Date of Termination.
(c)
“
Cause ” means:
(A)
the willful and
continued failure of Executive to perform substantially her duties
with the Company (other than any such failure resulting from
Executive’s incapacity due to physical or mental illness or
any such failure
subsequent to
Executive being delivered a Notice of Termination without Cause by
the Company or Executive delivering a Notice of Termination for
Good Reason to the Company) that is not remedied within
30 days after a written demand for substantial performance is
delivered to Executive by the Chairman of the Board, the Chairman
of the Compensation Committee or the Chief Executive Officer, which
specifically identifies the manner in which Executive has not
substantially performed Executive’s duties and that such
failure if not remedied constitutes “Cause” under this
Agreement; or
(B)
Executive’s
conviction by a court of law, Executive’s admission in a
legal proceeding that she is guilty or Executive’s plea of
nolo contendre , in each case, with respect to a
felony.
For purposes of this Section 1(c),
no act or failure to act by Executive shall be considered
“willful” unless done or omitted to be done by
Executive in bad faith and without reasonable belief that
Executive’s action or omission was in, or not opposed to, the
best interests of the Company.
(d)
“ Date
of Termination ” means:
(A)
if
Executive’s employment is to be terminated for Disability,
30 days after Notice of Termination is given (provided that
Executive shall not have returned to the performance of
Executive’s duties on a full-time basis during such
30 day period);
(B)
if
Executive’s employment is to be terminated by the Company for
Cause or by Executive for Good Reason, the date specified in the
Notice of Termination;
(C)
if
Executive’s employment is to be terminated by the Company for
any reason other than Cause, the date specified in the Notice of
Termination, which shall be 90 days after the Notice of
Termination is given, unless an earlier date has been expressly
agreed to by Executive in writing;
(D)
if
Executive’s employment terminates by reason of death, the
date of death of Executive; or
(E)
if
Executive’s employment is terminated by Executive in a
Non-Qualifying Termination, the date specified in Executive’s
Notice of Termination, but not more than 30 days after the
Notice of Termination is given, unless expressly agreed to by the
Company in writing.
(e)
“
Disability ” means termination of Executive’s
employment by the Company due to Executive’s absence from
Executive’s duties with the Company on a full-time basis for
at least one-hundred-eighty (180) consecutive days as a result of
Executive’s incapacity due to physical or mental illness,
unless within 30 days after Notice of Termination is given to
Executive following such absence Executive shall have returned to
the full-time performance of Executive’s duties.
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(f)
“ Good
Reason ” shall mean termination of Executive’s
employment by Executive based on any of the following
events:
(A)
any change in the
duties or responsibilities (including reporting responsibilities)
of Executive that is inconsistent in any material and adverse
respect (which may be cumulative) with Executive’s
position(s), duties, responsibilities or status with the Company
(including any adverse diminution of such duties or
responsibilities), provided, however , that Good Reason
shall not be deemed to occur upon a change in duties or
responsibilities (other than reporting responsibilities) that is
solely and directly due to the Company no longer being a publicly
traded entity;
(B)
the failure to
reappoint or reelect Executive to any position held by Executive
without Executive’s consent;
(C)
a material breach
of this Agreement by the Company or POAMI including but not limited
to reduction in Executive’s Annual Base Salary (as defined in
Section 4(a)) or other reduction in medical, dental, life or
disability benefits (except to the extent such reductions apply
consistently to all other senior executives);
(D)
failure to offer
a short-term incentive plan each year with a target bonus of not
less than 60% of Annual Base Salary and a potential to earn at
least 100% of Annual Base Salary (unless Executive consents
otherwise, to be paid no later than the end of the first calendar
quarter after the year with respect to which such bonus relates);
or
(E)
the relocation by
the Company of Executive’s principal workplace location more
than 50 miles from the workplace location principally used by
Executive as of the date hereof, which the parties agree is, as of
the date hereof, the Company’s facility located at 4221 West
John Carpenter Freeway, Irving, Texas 75063.
Executive must provide Notice of
Termination of employment within one-hundred-eighty (180) days
following Executive’s knowledge of an event or facts
constituting Good Reason (or the last of such events or facts if
cumulative) or such event or facts shall not constitute Good Reason
under this Agreement.
(g)
“
Non-Qualifying Termination ” means a termination of
Executive’s employment under any circumstances not qualifying
as a Qualifying Termination, including without limitation any
termination by the Company for Cause, any termination by Executive
without Good Reason or for no reason at all or any termination on
account of death, Disability or Retirement.
(h)
“ Notice
of Termination ” means a written notice of termination of
employment given by one party to the other party pursuant to
Section 15(b).
(i)
“
Qualifying Termination ” means a termination of
Executive’s employment (i) by the Company other than for
Cause, or (ii) by Executive for Good Reason. Termination
of
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Executive’s
employment on account of death, Disability or Retirement shall not
be treated as a Qualifying Termination.
(j)
“
Retirement ” means Executive’s termination of
her employment on or after her attainment of age 65.
(k)
“
Subsidiary ” means any corporation or other entity in
which the Company has a direct or indirect ownership interest of
50% or more of the total combined voting power of the then
outstanding securities or interests of such corporation or other
entity entitled to vote generally in the election of directors or
in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets upon
liquidation or dissolution.
2.
Employment and
Duties .
(a)
Term of
Employment . The Company agrees to
employ Executive, and Executive agrees to enter into employment
with the Company, in accordance with the terms and provisions of
this Agreement, for the Term of this Agreement. Upon
termination of Executive’s employment (regardless of whether
such termination constitutes a Qualifying Termination or
Non-Qualifying Termination), Executive shall be relieved of any
obligation to continue to perform the duties described in
Section 2(b) effective as of the Date of Termination.
The termination of the employment relationship by either party for
any reason or for no reason at all shall not constitute a breach of
this Agreement, but certain obligations and benefits shall survive
such termination of employment as set forth in
Section 18.
(b)
Duties
. During
the period of Executive’s employment under this Agreement,
Executive shall serve as Executive Vice President and Chief
Marketing Officer of the Company. Executive shall devote
Executive’s full business time and attention to the affairs
of the Company and her duties as its Executive Vice President and
Chief Marketing Officer. Executive shall have such duties as
are appropriate to Executive’s position as Executive Vice
President and Chief Marketing Officer, and shall have such
authority as required to enable Executive to perform these duties.
Consistent with the foregoing, Executive shall comply with all
reasonable instructions of the President and Chief Executive
Officer and Board of Directors of the Company. Executive
shall report to the President and Chief Executive Officer. In
addition, during the period of Executive’s employment under
this Agreement, Executive may serve as an officer and/or director
of a Subsidiary or Subsidiaries if requested to do so by the
Board. Executive may resign from the board of directors of
any Subsidiaries at any time in her sole and absolute
discretion.
3.
Term of
Agreement . The Term of this
Agreement (“Term”) shall commence on the date of this
Agreement and shall continue until the Date of Termination that
results from a Qualifying Termination or Non-Qualifying
Termination. Certain obligations and benefits shall survive the
expiration of the Term as set forth in Section 18.
4.
Base Salary
and Benefits .
(a)
Base
Salary . During the period of
Executive’s employment under this Agreement, the Company
shall pay Executive an annual base salary (“Annual Base
Salary”) at an annual rate equal to not less than Two Hundred
Sixty-Five Thousand and No/100 Dollars ($265,000.00), which shall
be reviewed annually by the Board or the Compensation
Committee
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of the
Board. Executive’s Annual Base Salary shall be paid in
accordance with the standard practices for other senior corporate
executives of the Company.
(b)
Bonuses
. Executive
shall be eligible to receive annually or otherwise any bonus
awards, whether payable in cash, shares of common stock of the
Company or otherwise, which the Company, the Board, the
Compensation Committee of the Board or such other authorized
committee of the Board determines to award or grant; provided,
however , that Executive shall participate under a short-term
incentive plan (subject to its terms which shall be reasonably
determined by the Board and based on targets that are reasonably
attainable) each year with a target bonus of not less than 60% of
Annual Base Salary and a potential to earn at least 100% of Annual
Base Salary. The bonus payable to Executive, if any, under
the short-term incentive plan with respect to 2007 shall be
calculated in accordance with the respective plan and shall take
into account a pro-rata portion based on the number of days
from March 8, 2007 through December 31, 2007 (i.e.,
308/364).
(c)
Benefit
Programs . During the period of
Executive’s employment under this Agreement, Executive shall
be eligible to participate in all employee benefit plans and
programs of the Company from time to time in effect for the benefit
of senior executives of the Company (subject to meeting generally
applicable participation requirements under the applicable plan or
program), including, but not limited to, retention plans, stock
option plans, restricted stock grants, 401(k) plans, group life
insurance, hospitalization and surgical and major medical
coverages, employee stock purchase plans, car allowances, paid time
off (“PTO”) and holidays, long-term disability, and
such other benefits as are or may be made available from time to
time to senior executives of the Company. For purposes of
this Section 4(c), the term “the Company” shall also
include POAMI. Executive’s car allowance shall be an amount
not less than $1,128 per month and PTO shall accrue at a rate of
8.33 hours per pay period with a maximum cumulative accrual of 300
hours.
(d)
Business
Expenses and Perquisites . Executive shall be
reimbursed for all reasonable expenses incurred by Executive in
connection with the conduct of the business of the Company
(including reasonable travel expenses), provided Executive properly
accounts therefor in accordance with the Company’s policies.
During the period of Executive’s employment under this
Agreement, Executive shall also be entitled to such other
perquisites as are customary for senior executives of the
Company.
(e)
Office and
Services Furnished . During the period of
Executive’s employment under this Agreement, the Company
shall make available to Executive office space, secretarial
assistance and such other facilities and services as shall be
suitable to Executive’s position and adequate for the
performance of Executive’s duties hereunder.
(f)
Stock Option
Plan .
On the date which is sixty (60) days after the date of this
Agreement, and in accordance with Section 5(a)(D) hereof, Company
shall grant Executive options to purchase 100,000 shares of
Company’s common stock, which options shall vest and be
exercisable in accordance with the Company’s 2004 Stock
Option Plan and the Option Agreement between the Company and
Executive of even date herewith and attached hereto as Annex
A.
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5.
Payments Upon
Termination of Employment .
(a)
Qualifying
Termination . If the employment of
Executive terminates pursuant to a Qualifying Termination,
then:
(A)
within five (5)
business days following the Date of Termination, the Company shall
pay to Executive a lump-sum cash payment equal to the sum
of
(I)
Executive’s
Annual Base Salary payable through the Date of
Termination;
(II)
bonus amounts
payable to Executive for prior fiscal years (to the extent not
previously paid);
(III)
bonus amounts not
paid to Executive as a result of Executive’s election to
defer payment;
(IV)
a pro rata
portion of Executive’s annual bonus for the fiscal year in
which the Date of Termination occurs (to the extent not previously
paid) in an amount at least equal to (1) Executive’s
Bonus Amount multiplied by a fraction, the numerator of which is
the number of days in a fiscal year in which the Date of
Termination occurs through the Date of Termination and the
denominator of which is three hundred sixty-five (365), and reduced
by (2) any amounts paid to Executive from the Company’s
annual incentive plan for the fiscal year in which the Date of
Termination occurs; and
(V)
the cash
equivalent of any accrued Paid Time Off; in each case to the extent
not already paid.
(B)
within five (5)
business days following the Date of Termination, the Company shall
pay to Executive a cash lump-sum equal to the sum of
Executive’s highest Annual Base Salary during the 12-month
period immediately prior to the Date of Termination, plus
Executive’s Bonus Amount;
(C)
the Company shall
continue, for a period of one (1) year following Executive’s
Date of Termination, to provide Executive (and Executive’s
dependents, if applicable) with substantially similar levels of
medical, dental, and life insurance benefits upon substantially
similar terms and conditions as Executive would have been entitled
to receive if she had continued in employment; provided,
that , if Executive cannot continue to participate in the
Company benefit plans providing such benefits, the Company shall
otherwise provide, at the Company’s option, (i) such
benefits on a substantially similar basis as if continued
participation had been permitted through the Company’s
benefit plans (the “Continued Benefit Plans”) or (ii) a
lump-sum cash payment based on the cost of premiums comparable to
those that would be required to receive such benefits on a
substantially similar basis plus the amount of any conversion fees
required to convert from group coverage to individual coverage
under the Company’s existing benefit plans (the
“Benefits Lump-Sum Payment”). If the Company
elects to provide Executive with
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Continued Benefit
Plans, Executive shall cooperate with the Company and each provider
of any such Continued Benefit Plan in order for the Company to
obtain such Continued Benefit Plans for Executive, which
cooperation shall include but not be limited to providing copies of
medical records and other information required by any provider of
such Continued Benefit Plan and undergoing one or more physical
examinations. If the Company elects to provide Executive with
the Benefits Lump-Sum Payment, the Company shall notify Executive
of its intention to make this election not later than 90 days
prior to the date on which Executive’s coverage under
existing benefit plans will expire, and if, within 60 days
after Executive receives such notification from the Company,
Executive presents the Company with one or more benefit plans that
Executive has obtained or intends to obtain that provide benefits
on a substantially similar basis as the benefits provided to
Executive prior to the Date of Termination (and acknowledgment from
the provider of such benefit plans that such benefit plans have
been or can be obtained by Executive on those terms, including,
without limitation, at least substantially similar scope of
coverage, substantially similar deductibles and substantially
similar co-payments), then the Benefits Lump-Sum Payment shall be
made based on the premiums plus any other administrative fees
(except co-payments) charged by the Company offering such
plans. If the Company elects to provide Executive with the
Benefits Lump-Sum Payment and it is determined by the Company that
any portion of the Benefits Lump-Sum Payment constitutes taxable
wages for federal income and/or employment tax purposes, the
Company agrees to pay Executive an additional amount (the
“Benefits Gross-Up Payment”) such that the net amount
retained
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