Exhibit 10.1
PROTECTION ONE, INC.
SENIOR MANAGEMENT
SHORT-TERM INCENTIVE PLAN
Effective January 1,
2009
The Protection One, Inc. Senior
Management Short-Term Incentive Plan (“Plan”) is
intended to motivate officers and other members of senior
management of Protection One, Inc. and certain of its
designated business segments to achieve the highest level of
performance and to further the achievement of Protection
One’s goals, objectives, and strategies. The Plan is
designed to reward exceptional performance using financial
incentives to supplement base compensation. Also, the Plan is
intended to enhance Protection One’s ability to attract and
retain talented employees. Finally, the Plan is intended to
benefit Protection One in the pursuit of its goals and objectives
by stimulating and motivating the participants, which will in turn
enhance productivity.
1.
Definitions
. As used
herein, the following words and phrases shall have the following
meanings unless the context clearly indicates
otherwise:
(a)
Award : The total incentive
award made to a Participant under the terms of the
Plan.
(b)
Award
Criteria : Consists of the
Performance Component and Discretionary Component as approved by
the Board from time to time, and as same may be amended from time
to time in accordance with the terms hereof.
(c)
Base
Compensation : Annualized salary
during the last half-month pay period of 2009 paid to an employee,
excluding overtime, bonuses, commissions, or any pay element other
than the base rate of compensation. Base Compensation will be
pro-rated based on months of employment as a Participant, e.g.,
Base Compensation for an eligible employee whose employment with
Protection One as a Participant commenced on July 1, 2009 will
be calculated as the product of (i) annualized salary in the
last half-month pay period and (ii) 50%.
(d)
Board : The Board of
Directors of the Company.
(e)
CMS
Segment : The Company’s
Wholesale segment.
(f)
CMS Senior
Management : The individual employed by
CMS who holds the title of President and those individuals who are:
(i) employed in the CMS Segment in pay grades A, B or C of the wage
and salary administration plan, and (ii) employed in the CMS
Segment not in pay grades A, B or C but designated as a member of
Senior Management by the CEO.
(g)
Company
:
Protection One, Inc., a Delaware corporation, and its
successors and assigns.
(h)
Company Senior
Management : Those individuals who are:
(i) employed by the Company in pay grades A, B or C of the
wage and salary administration plan, and (ii) employed by the
Company not in pay grades A, B or C but designated as a member of
Senior Management by the CEO.
(i)
Designated
Segments : The CMS Segment and the NMF
Segment.
(j)
Discretionary
Component : Portion of the Award
Criteria based on financial or non-financial criteria or both as
described in Section 6 and applied in the discretion of the
appropriate managerial decision-maker to evaluate the performance
of Participants, in accordance with pay grade and management level
as set forth in Section 2.
(k)
Executive
Officers : Those individuals who
hold the following officer positions: (i) President/Chief
Executive Officer (“CEO”) of the Company or POAMI;
(ii) any Executive Vice President (“EVP”) of the
Company or POAMI, including without limitation the Executive Vice
President and Chief Financial Officer (“CFO”) and the
Executive Vice President and Chief Operating Officer
(“COO”).
(l)
Incentive
Period : The twelve month
period measured in the final publication of the year-end
consolidated Financial Statements of the Company.
(m)
NMF
Segment : The Company’s
Multifamily segment.
(n)
NMF Senior
Management : Those individuals who are:
(i) employed in the NMF Segment in pay grades A, B or C of the
wage and salary administration plan, and (ii) employed in the
NMF Segment not in pay grades A, B or C but designated as a member
of Senior Management by the CEO.
(o)
Officers
: Those
individuals employed by the Company or POAMI who hold the following
officer positions: (i) Vice President and Treasurer,
(ii) Vice President, General Counsel and Secretary, and
(iii) Senior Vice President of Customer
Operations.
(p)
Participant
: Each
(i) Executive Officer, Officer and member of Senior
Management, other than those Executive Officers, Officers
and members of Senior Management who are participants in a separate
non-equity incentive plan (other than retention programs), and
(ii) employee who is designated for participation in the Plan
by the Board or the CEO pursuant to Section 3, regardless of
his or her participation in a separate non-equity incentive
plan.
(q)
Performance
Component . Portion of the Award
Criteria based on performance of the Company or Designated Segment
as described in Section 5.
(r)
Plan : The Plan herein set
forth, and as from time to time amended.
(s)
POAMI
Segment : The Company’s Retail
segment.
(t)
POAMI Senior
Management : Those individuals who are:
(i) employed in the POAMI Segment in pay grades A, B or C of
the wage and salary administration plan, and (ii) employed in
the POAMI Segment not in pay grades A, B or C but designated as a
member of Senior Management by the CEO.
(u)
Senior
Management : The Company Senior
Management, POAMI Senior Management, NMF Senior Management and CMS
Senior Management.
(v)
Target Award
Percentage : That percentage of a
Participant’s Base Compensation which the Board (or the CEO
pursuant to Section 3) shall from time to time
determine
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to be available
to a Participant under the Plan, or which is specified in any
employment agreement with Participant, which employment agreement
is approved by the Board. As an example, a member of Senior
Management may be targeted to earn up to 25% of his/her Base
Compensation as an Award if all applicable criteria are
achieved. The Target Award may apply to a class of employees
or to individual employees, at the discretion of the Board (or the
CEO pursuant to Section 3).
2.
Administration
. The Board shall
have authority for establishing the overall Plan, administering the
Plan, determining whether actual individual compensation awards
will be paid, and approving the amount of the actual individual
compensation awards. The Board may delegate any or all of
such authority with respect to the Plan to a committee of the Board
or, with respect to decisions or determinations affecting Plan
Participants other than the CEO or CFO, to the CEO or CFO of the
Company. Unless subsequently modified by a resolution of the Board,
approval of the payment of individual awards under the Plan are and
shall be delegated to the Compensation Committee.
Neither a member of the Board, nor
any agent, officer, fiduciary, or employee of the Company shall be
liable for any act, omission, interpretation, construction, or
determination made in good faith in connection with their
responsibilities with respect to the Plan; and the Company hereby
agrees to indemnify the members of the Board and all agents,
officers, fiduciaries, and employees of the Company in respect to
any claim, loss, damage, or expense (including counsel fees)
arising from any such act, omission, interpretation, construction,
or determination to the full extent permitted by law.
The day-to-day administration of the
Plan with regard to specific classes of Participants shall be as
follows:
(a)
Executive
Officers : The Board has
authority for the day-to-day supervision of the Plan, including
designation of the Executive Officers’ goals, determination
of the achievement of such goals, determination of the award size
relating to the goals, and the determination of the amount of the
discretionary award.
(b)
Officers
: The Board
has authority for the day-to-day supervision of the Plan including
the designation of the Officers’ goals, determination of the
achievement of such goals, determination of the award size relating
to the goals, and the determination of the amount of the
discretionary award.
(c)
Senior
Management : The Executive
Officers have authority for the day-to-day supervision of the Plan,
including the designation of goals, determination of the
achievement of such goals, determination of the award size relating
to the goals, and the determination of the amount of the
discretionary award.
3.
Eligibility to
Participate . Only those employees
who are Participants, as that term is defined in
Section 1(p) above, are Participants in the Plan.
The CEO shall determine, from time-to-time, whether the Plan should
be extended to other individuals or groups of employees of the
Company or its Designated Segments; provided, however, that the CEO
shall not have authority to extend the Plan to additional executive
officers.
4.
Award
Criteria . Awards under the Plan will
be based on a Performance Component, on which 70% of the Award will
be based, and a Discretionary Component, on which 30% of the Award
will be based.
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5.
Performance
Component . The Performance
Component shall be calculated utilizing the following criteria for
each Participant: (i) the Adjusted EBITDA Criterion, from
which 45% of the Target Award (the “Adjusted EBITDA Criterion
Percentage”) is derived, and (ii) the Recurring Monthly
Revenue (“RMR”) Criterion, from which 25% of the Target
Award (the “RMR Criterion Percentage”) is derived.
These criteria are further described below.
(a)
Adjusted
EBITDA and RMR Criterion : The purposes of these
measures are to foster a team orientation and to directly tie a
Participant’s incentive to the Adjusted EBITDA and RMR of the
Company and the Designated Segments, which the Company believes are
key operating metrics and directly affect shareholder
value.
Adjusted EBITDA
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