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1994 STOCK OPTION PLAN
(As amended through January 26, 1996)
EXHIBIT 10.1
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PROTECTION ONE, INC.
1994 STOCK OPTION PLAN
(AS AMENDED THROUGH JANUARY 26, 1996)
1. PURPOSE.
The purposes of this 1994 Stock Option Plan (THIS "PLAN") are
to provide long- term incentives and rewards to directors, officers and key
employees of Protection One, Inc., a Delaware corporation (THE "COMPANY"), to
assist the Company in attracting and retaining such individuals on a basis
competitive with industry practices, to align their interests with those of the
Company's stockholders, and to provide additional compensation to them.
2. EFFECTIVE DATE.
This Plan shall be effective as of the date of its adoption by
the Board of Directors of the Company (THE "ADOPTION DATE"), subject to the
approval of this Plan by the holders of a majority of the issued and outstanding
shares of the Class A Common Stock of the Company (THE "COMMON STOCK") and the
voting preferred stock of the Company, voting together as a single class and
with each share of such preferred stock entitled to the number of votes
determined in accordance with Section 9(a) of Article IV of the Company's
Restated Certificate of Incorporation (THE DATE ON WHICH THE HOLDERS SO APPROVE
THE PLAN TO BE REFERRED TO HEREIN AS THE "APPROVAL DATE"). Grants of "Options"
(as hereinafter defined) may be made under this Plan on and after the Adoption
Date, but all rights of the participants shall be subject to such stockholder
approval of this Plan. In the event such stockholder approval is not obtained,
all Options under this Plan shall be null and void ab initio.
3. ADMINISTRATION OF THIS PLAN.
3.1 This Plan shall be administered by the Compensation Committee of
the Board of Directors of the Company, or such other committee of the Board of
Directors as shall be designated by the Board of Directors (THE "COMMITTEE").
Each member of the Committee shall be a "disinterested person," as such term is
defined in Rule 16b-3 promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934 (THE "1934 ACT") and that became
effective on May 1, 1991, as such rule may be amended from time to time ("RULE
16B-3"), and no member of the Committee shall be eligible to participate in this
Plan or in any other plan of the Company if such participation would cause such
member to cease to be a disinterested person.
3.2 The Committee shall have full power and authority in its
discretion, subject to and not inconsistent with the express provisions of this
Plan, to take any and all actions required or permitted to be taken under this
Plan. Such full power and authority shall include, without limitation, the
selection of participants to whom Options shall be granted; the determination of
the number of shares of Common Stock purchasable upon the exercise of each
Option granted to each participant and the amount payable by the participant
upon the exercise thereof (THE "EXERCISE PRICE"); the terms and conditions of
each grant of Options, including without limitation establishing the objectives
and conditions, if any, for the earning or vesting of Options; the right to
interpret and construe each provision of this Plan and of all agreements and
instruments reflecting the terms and conditions of all grants hereunder (THE
"AGREEMENTS"); the making of all required or appropriate determinations under
this Plan and the Agreements; and the adoption, amendment and recision of such
rules and regulations relating to this Plan as the Committee shall determine in
its discretion (THE "RULES"); in each case subject to the express provisions of
this Plan.
3.3 The interpretation or construction by the Committee of this Plan,
any Agreement or any Rule and all determinations by the Committee shall in each
case be final, binding and conclusive with respect to all interested parties,
unless otherwise determined by the Board of Directors. No member of
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the Committee shall be personally liable for any action,
failure to act, determination, interpretation or construction made in good
faith.
3.4 The Committee shall determine the "fair market value" of the Common
Stock from time to time for purposes of this Plan in accordance with such
procedures for the determination thereof as the Committee shall determine.
4. PARTICIPANTS.
Participants in this Plan shall be directors, officers and key
employees of the Company or its subsidiaries selected by the Committee. Nothing
set forth in this Plan or in any Agreement shall confer upon any director,
officer or employee any right to continue in the employ of the Company or its
subsidiaries or as an officer of the Company, nor limit in any manner the right
of the Company to terminate such office or employment for any reason whatsoever,
with or without good cause. No employee or other person shall have any right to
be granted an Option.
5. SHARES OF STOCK SUBJECT TO THIS PLAN.
The shares of Common Stock available for issuance under this
Plan pursuant to the exercise of "ISOs" or "NQSOs" (as each such term is
hereinafter defined), shall consist of 944,000 shares of Common Stock in the
aggregate, subject to adjustment as provided in Section 13. Such number of
shares shall be set aside out of the authorized but unissued shares of Common
Stock not reserved for any other purpose or out of Common Stock held in or
acquired for the treasury of the Company. Should an Option be terminated for any
reason without being exercised, or be cancelled in whole or in part, the shares
of Common Stock subject to such Option shall again be available for issuance
under this Plan.
6. GRANT OF OPTIONS.
The Committee may from time to time, in its sole discretion,
award to such directors, officers and key employees as it designates options to
purchase shares of the Common Stock (THE "OPTIONS"). In connection therewith,
the Committee shall have full and final authority in its discretion, subject to
the express provisions of this Plan, (i) in the case of each Option, to
determine whether the Option shall be an incentive stock option (AN "ISO")
pursuant to Section 422 of the Internal Revenue Code of 1986 (THE "IRC"), as
such section may from time to time be amended or supplemented, or an Option that
does not qualify under such Section 422 (AN "NQSO"), (ii) to determine the time
or times at which Options will be awarded, (iii) to determine the number of
shares that may be purchased upon the exercise of each Option, (iv) to determine
the Exercise Price for the shares purchasable upon the exercise of each Option,
which price shall not be less than the minimum specified in Section 7.1, (v) to
determine the time or times when each Option shall become exercisable and the
duration of the exercise period, and (vi) to prescribe the form or forms of the
Agreements reflecting the terms and conditions of each Option.
7. EXERCISE PRICE AND CONSIDERATION.
7.1 The Exercise Price shall be determined by the Committee at the time
of each grant of Options; provided, however, that the Exercise Price for an ISO
shall not be less than 100% of the fair market value of the Common Stock on the
date on which the ISO is granted.
7.2 The Exercise Price shall be paid in cash, by check payable to the
order of the Company, by the surrender of shares of the Common Stock having a
fair market value (determined in accordance with Section 3.4 above) equal to the
Exercise Price on the date on which the Option is exercised, or any combination
of the foregoing. Notwithstanding the foregoing, the Exercise Price may also be
paid by delivery to the Company of (I) cash in the amount that is not less than
the aggregate par value of the shares being purchased, and (II) a binding, joint
and several obligation of the participant and a financial
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institution or broker approved by the Company to pay the balance of the Exercise
Price on such terms as may be specified from time to time by the Committee;
provided, however, that a participant may pay the Exercise Price pursuant to
this sentence if and only if either (x) the Option being exercised is an NQSO,
or (y) the Option being exercised is an ISO and the Company is satisfied that
the participant understands that the effect of such arrangement will be to cause
a "disqualifying disposition" of the participant's shares and a loss to the
participant of the favorable tax treatment of such ISO provided by the IRC. The
Committee may determine to cause the Company to lend directly to a participant
some or all of the funds required to pay the Exercise Price, on such terms and
subject to such conditions as the Committee may establish.
8. MANNER OF EXERCISE.
Unless and to the extent otherwise provided in the applicable
Agreement, and subject to the limitations set forth in this Plan, each Option
may be exercised from time to time in whole or in part by the participant
delivering to the Company at its main office (to the attention of the President
and the Chief Financial Officer) written notice of the number of shares with
respect to which the Option is being exercised accompanied by full payment to
the Company of the Exercise Price of the shares being purchased; provided,
however, that in the event the consideration is other than cash, such written
notice shall include the participant's election to pay some or all of the
Exercise Price as otherwise permitted by Section 7.2, in which case the
participant shall have a reasonable time (as determined by the Committee) to
arrange for the delivery to the Company of the balance of the Exercise Price or
the agreement that will reflect the terms of such payment; and provided,
further, that if payment of the Exercise Price is to be made in shares of Common
Stock, the participant shall deliver to the Company stock certificates
evidencing such shares properly endorsed for transfer in negotiable form. If
someone other than the participant is exercising an Option, the person or
persons so exercising the Option shall be required to furnish to the Company
appropriate documentation that such person or persons have the full legal right
and power to exercise the Option on behalf of and for the participant.
9. DURATION AND PERIOD FOR EXERCISE OF OPTIONS.
9.1 Each Option shall be exercisable on such date or dates and during
such period as shall be determined by the Committee at the time of grant,
provided that (i) no ISO shall be exercisable after the expiration of 10 years
after the grant date, (ii) no Option shall be exercisable unless and until
either a registration statement under the Securities Act of 1933, as amended, is
in effect registering the shares of Common Stock to be issued upon exercise of
the Options or, in the opinion of counsel for the Company, an exemption from
registration is available, and (iii) with respect to each grant of Options to a
participant that is required to file reports pursuant to Section 16(a) of the
1934 Act, no Option shall be exercisable prior to six months after the earlier
of (I) the date it is granted, and (II) the Approval Date. Subject to the
foregoing, the Committee shall specify at the time each Option is granted, and
shall set forth in the corresponding Agreement, the time or times at which, and
in what amounts, the Option may be exercised.
9.2 Upon the termination of the employment by the Company or its
subsidiaries of a participant, such participant's rights to exercise an Option
then held shall be as follows, subject to the authority of the Committee to
shorten or extend the exercisability of an Option in its sole discretion (with
the consent of the participant or the participant's legal representative in the
case of an ISO):
(a) Death or Permanent and Total Disability. If the
employment is terminated by reason of the death or "permanent and total
disability" (as defined in Section 22(e)(3) of the IRC) of the
participant, each Option held by the participant on the date of
termination shall terminate on the fixed expiration date of such
Option; provided, however, that in the case of ISOs the date of
termination shall be the date that is 12 months after the date of
termination of employment if such date is earlier than the fixed
expiration date of the Option.
(b) Other Disability. If the employment is terminated
by reason of the disability of the participant that is not permanent
and total disability (as defined in Section 22(e)(3)
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of the IRC), each Option held by the participant on the date of
termination shall terminate on the fixed expiration date of such
Option; provided, however, that in the case of ISOs the date of
termination shall be the date that is three months after the date of
termination of employment if such date is earlier than the fixed
expiration date of the Option.
(c) Other Termination. If the employment is
terminated by any reason other than death or disability, each Option
held by the participant on the date of termination shall terminate on
the earlier of (i) the date that is three months after the date of
termination of employment, or (ii) the fixed expiration date of such
Option.
9.3 If the employment of a participant is terminated by reason of the
death or permanent and total disability of the participant, all Options held by
such participant shall become immediately vested, notwithstanding any conditions
to the vesting of such Options set forth herein or in the Agreement reflecting
such Options. If the employment of a participant is terminated by any reason
other than the death or permanent and total disability of the participant, all
Options not vested as of the time of termination shall be forfeited, subject to
the authority of the Committee to authorize, in the applicable Agreement, at the
time of termination or otherwise, the immediate vesting of all or such portion
of such Options as it may determine. The Committee shall have the authority to
accelerate the vesting of all or some portion of the Options notwithstanding any
conditions to vesting of such Options set forth herein or in the Agreement
reflecting such Options.
9.4 The Options of a participant who dies shall be exercisable by a
legatee or legatees of such Options under the participant's last will, or by
such participant's executor, personal representative or distributees. However,
in the event of a participant's death after the date of termination of
employment (which termination was for a reason other than the death of the
participant), such deceased's participant's Options shall expire in accordance
with their terms as if such participant were still living.
9.5 The Committee shall have the authority to determine the reason for
and date of termination of employment of each participant (including but not
limited to determining whether a termination is by reason of disability), which
determination shall be final, binding and conclusive on all interested parties.
10. LIMITATION ON GRANT OF ISO'S.
10.1 The aggregate fair market value (determined as of the time the
Option is granted) of the shares of Common Stock for which ISO's may first be
exercisable by an participant during any calendar year shall not exceed
$100,000.
10.2 No ISO may be granted under this Plan after the 10th anniversary
of the Adoption Date.
10.3 No ISO may be granted to any employee who owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company.
11. ACCELERATION OF OPTIONS.
11.1 In the event that the Company enters into one or more agreements
to dispose of all or substantially all of its assets or the Company's
stockholders dispose of or become obligated to dispose of 50% or more of the
outstanding shares of Common Stock, other than to the Company or a subsidiary of
the Company, in either case by means of a tender offer, sale, merger,
reorganization or liquidation, in one or a series of related transactions (AN
"ACCELERATION EVENT"), then each outstanding Option shall become exercisable
during the 30 days immediately prior to the scheduled consummation of the
Acceleration Event with respect to the full number of shares for which such
Option has been granted: provided, however, that no Acceleration Event shall be
deemed to occur for purposes of this section (unless otherwise provided in the
applicable Agreement) in the event that (i) the term of the agreements pursuant
to which such transaction is occurring require as a condition to the
consummation thereof that each Option
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shall either be assumed by a successor corporation or parent thereof or be
replaced with a comparable option to purchase shares of capital stock of the
successor corporation or parent thereof, and (ii) the transaction is approved by
a majority of the directors who have been in office for more than 12 months
prior to the scheduled consummation of the transaction. Any exercise of Options
during such 30-day period shall be conditioned upon the consummation of the
Acceleration Event and shall be effective only concurrently with the
consummation of the Acceleration Event, and in the event the Acceleration Event
is not consummated all exercises of Options made pursuant to this section shall
be of no further force or effect; unless, with respect to any such Option, such
Option was otherwise exercisable in accordance with its terms without regard to
this section and the participant exercising such Option indicates in writing
that such exercise is not conditioned on the consummation of the Acceleration
Event. Upon consummation of the Acceleration Event, all outstanding Options,
whether or not accelerated pursuant to this section, shall terminate and cease
to be exercisable, unless assumed by the successor corporation or a parent
thereof.
11.2 In the event of the occurrence of an Acceleration Event in which
the Company will not be the surviving entity or in which all of the shares of
Common Stock of the Company are being acquired, any participant who is then
subject to the filing requirements imposed under Section 16(a) of the 1934 Act
with respect to the Company shall receive a payment of cash equal to the
difference between the aggregate fair market value of the shares of Common Stock
subject to such accelerated Option and the aggregate Exercise Price of such
shares. Payment shall be made within 10 days after the consummation of the
Acceleration Event. The foregoing payments under this section shall be made in
lieu of and in full discharge of any and all obligations of the Company with
respect to all subject Options of the participant.
11.3 The grant of Options under this Plan shall in no way affect the
right of the Company to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
12. CANCELLATION AND REPRICING OF OPTIONS.
12.1 The Committee shall have the authority to effect, at any time and
from time to time, with the consent of the affected participant, the
cancellation of any or all outstanding Options and the grant in substitution
therefor of new Options under this Plan (subject to the limitations hereof)
providing for the purchase of the same or a different number of shares of Common
Stock and, in the case of ISO's, the grant is at an Exercise Price not less than
100% of the fair market value of the Common Stock on the new grant date. The
Agreement reflecting the terms of the new Options may, in the discretion of the
Committee, include the same terms and conditions as the Agreement reflecting the
terms of the old Options including, without limitation, the same vesting
schedule.
12.2 The Committee may, in its discretion, amend the terms of any
Agreement, with the consent of the affected participant, to provide that the
Exercise Price of the shares remaining subject to the original Option shall be
reestablished at a price not less than 100% of the fair market value of the
Common Stock on the effective date of such amendment.
13. ADJUSTMENTS AND CHANGES IN THE COMMON STOCK.
13.1 In the event that the shares of Common Stock as presently
constituted shall be changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company, or if the number of such
shares of Common Stock shall be increased through the payment of a stock
dividend, then unless such change results in the termination of all outstanding
Options pursuant to the provisions of Section 11, there shall be substituted for
or added to each share of Common Stock theretofore appropriated or thereafter
subject or which may become subject to an Option, the number and kind of shares
of stock or other securities into which each outstanding share of Common Stock
shall be so changed, or for which each share shall be exchanged, or to which
each such share shall be entitled, as the case may be. Each Agreement shall be
deemed amended appropriately as to price and other terms as may be necessary in
the determination of the Committee to reflect the foregoing events. In the event
there shall be any other change in the number or kind of the outstanding Common
Stock, or of any stock
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or securities into which such shares have been changed, or for which it shall
have been exchanged, then if the Committee shall, in its sole discretion,
determine that such change requires an adjustment in the terms of any Option
granted or that may be granted, such adjustment shall be made in accordance with
such determination and each Agreement reflecting such terms shall be deemed
amended. Fractional shares resulting from any adjustment in Options pursuant to
this section shall be rounded down to the nearest whole number of shares.
13.2 Notwithstanding the foregoing, any and all adjustments in the
terms of ISO's shall comply in all respects with applicable sections of the IRC
and the regulations thereunder.
13.3 Notice of any adjustment in the terms of Options shall be given by
the Company to each holder of an Option that has been so adjusted. However, such
adjustment shall be effective and binding for all purposes whether or not such
notice is given or received.
14. APPLICATION OF RULE 16B-3.
This Plan shall be governed by Rule 16b-3.
15. NO RIGHTS AS STOCKHOLDER.
No participant shall have rights as a holder of Common Stock
with respect to Options unless and until certificates for shares of such stock
are issued to the participant or the participant's legal representative.
16. WITHHOLDING TAXES.
The Company shall have the right to withhold from the
participant, at the time of the issuance by the Company of any shares, any
federal, state or other taxes required by law to be withheld with respect to
such issuance or to require, through withholding from the participant's salary
or otherwise, the payment by the participant of any such taxes.
17. NON-TRANSFERABILITY.
No Option may be in any way transferred, assigned, pledged or
hypothecated by the participant to which it was granted or awarded, other than
by will or the laws of descent and distribution, and an Option may be exercised
during the participant's lifetime only by the participant or the participant's
legal representative; provided, however, that the Committee may upon request
consent to such transfers of NQSO's as it may determine in its sole discretion
subject to such conditions as the Committee may require and provided such
transfer will not cause the Plan to no longer comply with Rule 16b-3 or any
other regulatory requirements.
18. AMENDMENTS AND TERMINATION.
18.1 In addition to such amendments as are provided for in Section 12,
with the consent of the affected participant the Committee may amend any
outstanding Agreement in a manner not inconsistent with this Plan.
18.2 Unless the holders of at least a majority of the issued
outstanding shares of Common Stock shall have approved thereof, no amendment of
this Plan shall be effective which would cause the Plan to no longer comply with
Rule 16b-3 or other regulatory requirements. In the event that the Committee or
the Board of Directors determines at any time or from time to time that Rule
16b-3 requires that the terms of any outstanding Option be modified, the
Committee or the Board of Directors shall have
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the right and power to amend any outstanding Agreement, or otherwise modify the
terms of any outstanding Option, without the consent of the affected
participant(s) and irrespective of whether such modification is (i) consistent
with the terms of this Plan, or (ii) adverse to such participant(s). For the
purposes of this section, any (I) cancellation and reissuance, or (II) repricing
of any Options granted at a new Exercise Price as provided in Section 12 shall
not constitute an amendment of this Plan.
18.3 The Board of Directors may at any time terminate or from time to
time amend this Plan in whole or in part, but no such amendment shall adversely
affect any rights or obligations with respect to any Options theretofore granted
under this Plan (except as contemplated by Section 18.2).
19. GOVERNING LAW.
The validity and construction of this Plan and the Agreements
shall be governed by the laws of the State of Delaware.