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EXHIBIT 10.4
PROTECTION ONE, INC.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated as of May 24,
1996, between John W. Hesse (the "Employee") and Protection One, Inc.
(previously known as P1 Acquisition Corporation), a Delaware corporation
(including any and all subsidiaries, the "Company").
The Employee and the Company are parties to an Employment
Agreement dated as of September 16, 1991, as amended by Amendment No. 1 to
Employment Agreement dated as of June 29, 1994 (as so amended, the "Employment
Agreement").
The Employee and the Company desire to further amend and to
restate the Employment Agreement as provided herein.
Accordingly, the Company and the Employee agree that effective
as of the date hereof, the Employment Agreement shall be amended and restated
to read is full as follows:
1. The Company hereby employs and continues to engage the
Employee as Executive Vice President, Chief Financial Officer and Secretary.
The Employee's duties, responsibilities and title shall be determined by the
Company's Board of Directors (the "Board") and may change from time to time.
2. The term of this Agreement commenced on September 16,
1991 and shall expire on September 30, 1998; provided, however, that this
Agreement shall be subject to termination as provided in Section 13 hereof.
3. Subject to the supervision and direction of the Board or
its designees, the Employee agrees that he shall, at all times, faithfully,
industriously and to the best of his ability and experience, perform all the
duties that may be required of him pursuant to the terms hereof to the
satisfaction of the Company. The Employee shall devote his full time and
attention to the duties assigned to him and shall serve the Company diligently
and honestly in its business and use his best endeavors to promote the interest
of the Company.
4. As long as the Employee remains employed by the Company,
in consideration of the services to be performed by the Employee during the term
of this Agreement, the Company shall pay or cause to be paid the Employee, and
the Employee shall accept in full payment for such services, a base salary (the
"Base Salary") of $244,728 per year, payable monthly, subject to increase in
accordance with the Company's policy with respect to executive salaries as in
effect from time to time. Employee recognizes and agrees that all compensation,
benefits, and common stock performance warrants hereunder shall be good
consideration for this Employment Agreement, and any and all agreements required
to be executed hereunder.
5. During the term of this Agreement, the Employee shall be
entitled to participate in the Company's Common Stock Performance Warrant Plan
and all other benefit plans and programs available to the Company's key
employees in accordance with the terms and conditions thereof.
6. [Intentionally omitted]
7. [Intentionally omitted]
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8. The Company shall provide, at no cost to the
Employee, insurance and health care benefits from time to time (and subject to
modification) generally offered by the Company to its key employees.
9. In the event that the Employee is required to travel
in connection with his employment, the Company shall advance funds to the
Employee or reimburse him, for reasonable and documented travel, subsistence and
other out- of-pocket expenses, as well as non-travel business entertainment
expenses incurred by him, in accordance with the then prevailing policies of the
Company.
10. The Employee shall receive a monthly automobile
usage allowance of $500 in lieu of any other allowances for automobile expenses
other than reimbursement for gas, tolls and parking away from the office when on
Company business.
11. The Employee shall be entitled to vacation in
accordance with vacation policies adopted from time to time by the Board for the
Company's key employees. The Employee's initial vacation entitlement is three
(3) weeks per year.
12. (a) If this Agreement is terminated, whether
with or without cause, except as otherwise provided in this Section 12 the
Company shall have no further obligation to pay or cause to be paid to the
Employee any further compensation or benefits; provided, however, that the
Company shall pay or cause to be paid to the Employee all accrued but unpaid
Base Salary and all vacation and other employee benefits and all unreimbursed
expenses incurred prior to the termination date and owing to the Employee
pursuant to Sections 9, 10 and 11 hereof.
(a) In the event that during the term of this
Agreement the Employee dies, the Employee is terminated because of a Disability
pursuant to subsection 13(b) hereof, or the Company terminates the Employee's
employment without cause as provided in subsection 13(d) hereof, the Company
shall pay the Employee (or his estate or personal representative, as
applicable), during each of the three years following the date of the Employee's
death or termination of employment and in full satisfaction of the Company's
obligations hereunder or otherwise in connection with the Employee's employment
with the Company (other than the obligations set forth in subsection 12(a)), the
following amounts:
(i) If the Employee dies, an amount (the
"Termination Amount") each year equal to (x) the Base Salary at the
time of death plus (y) the last annual bonus paid or payable to the
Employee by the Company, if any, which Termination Amount shall be paid
to the Employee in equal monthly installments on the first day of each
calendar month; and
(ii) If the Employee's employment is terminated
by the Company as a result of a Disability or without cause, an amount
each year equal to the excess, if any, of the Termination Amount over
the total annual compensation for such year, if any, earned by the
Employee from any new place of employment. If the Employee earns for
any such year from any such new employment more than the Termination
Amount, the Employee shall not be entitled to any payment from the
Company with respect to such period, but the Employee shall not be
obligated to pay the amount of the excess to the Company; provided,
however, that the Employee shall be obligated to return to the Company
any payment or payments previously made to the Employee for such year
in excess of the amounts due under this paragraph (ii). The Employee
acknowledges that the amounts provided for in this paragraph (ii) shall
be subject to reduction as provided below and shall not be paid to the
Employee if he is terminated for cause or he voluntarily ceases to be
an employee of the Company. The payments provided for in this
paragraph (ii) shall be made to the
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Employee in equal monthly installments on the 10th day of each calendar
month, subject to the Company's receipt from the Employee of such
statement or statements as the Company may reasonably request setting
forth the compensation, if any, earned by the Employee from any new
place of employment during the immediately preceding calendar month.
Notwithstanding the provisions of paragraph (ii) immediately above, in
the event that the Employee breaches any of the covenants set forth in Section
17 hereof, then the "Termination Amount" shall consist solely of the Base Salary
at the time of the Employee's termination of employment and shall not include
any bonus.
13. This Agreement and Employee's employment by the
Company shall terminate upon the happening of any of the following events:
(a) The death of the Employee.
(b) At the Company's option, the inability of the
Employee to render for a period of 180 consecutive days, full and
effective service hereunder because of incapacity, whether resulting
from illness, accident or otherwise (such inability a "Disability").
(c) Receipt by the Employee of notice from the
Company of termination for cause. The term "cause" as used herein
shall mean:
(i) prolonged or repeated absence from duty
without the consent of the Company (for reasons other than
the Employee's health);
(ii) habitual neglect of the Employee's duties as
an employee of the Company;
(iii) engaging in any activity which is in conflict
with or adverse to the business interests of the Company;
(iv) violation in any material respect by the
Employee of any provision of this Agreement;
(v) willful or serious misconduct on the part of
the Employee relating to the performance of his duties
hereunder or otherwise injurious to the Company; or
(vi) a felony or conviction of a crime involving
moral turpitude of the Employee.
(d) Thirty (30) days after receipt by Employee of written
notice from the Company that this Agreement is terminated without cause,
or thirty (30) days after receipt of written notice to the Company from
Employee of termination as a result of the Company's violation in any
material respect of any provision of this Agreement; provided, however,
that any such notice given by Employee shall specify the violation or
violations claimed and that this Agreement shall not terminate as a
result of any such notice given by
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the Employee if the violation or violations set forth in the notice are
cured within 30 days after the notice is given.
(e) Six (6) months after receipt by the Company of written
notice from Employee that this Agreement is terminated without breach
by the Company; provided, however, that this Agreement may not be so
terminated by Employee prior to May 24, 1999.
The Employee shall be entitled to written notice and a hearing before
the Board prior to termination pursuant to subsection 13(c) and, in the case
of paragraphs (iii) and (iv) of that subsection, a 30-day opportunity to cure,
during which time the Employee may be excluded from the Company's premises.
In the event of the termination of this Agreement, whether for cause or
otherwise, all further obligations of the Company hereunder shall terminate,
except that the Employee shall continue to be eligible for payments in
accordance with the provisions of Section 12 above and 14 below, and the
Employee shall continue to observe the provisions set forth in Sections 14, 16
and 17 hereof, regardless of the termination of this Agreement for any reason
except termination pursuant to subsection 13(a).
14. The Employee agrees that in the event Employee ceases to be
an employee of the Company between the date hereof and September 16, 1996,
Employee shall have the obligation to transfer and deliver to the Company, in
consideration for the Company's loss of Employee's services, 39,510 shares of
Common Stock of the Company; provided, however, that in the event that, while
Employee is an employee of the Company, there is a merger, consolidation,
purchase of assets or other business combination by the Company with another
person in which the other person is the survivor or purchaser and cash or
non-cash consideration is distributed to the holders of the Company's Common
Stock, the Employee shall be released from this covenant in its entirety.
Upon such transfer and delivery of such shares, the Company shall pay
the Employee, in cash, the lesser of (i) Employee's cost for such shares, and
(ii) $.167 per share. In lieu of the transfer and delivery of such shares,
Employee may satisfy such obligation by assigning and transferring to the
Company "Share Contract rights." "Share Contract rights" shall mean any
contractual rights Employee then has to purchase from any person or entity, for
a price of not more than $.167 per share, a number of shares of Common Stock
that is not less than the number otherwise required to be transferred and
delivered to the Company pursuant to this Section. Share Contract rights shall
not be subject to any conditions other than those which, by their terms, could
be waived by the Company. All share and share price numbers set forth herein
shall be appropriately adjusted for any stock splits, reverse stock splits and
recapitalizations of the Company occurring after the date hereof.
15. The Company shall be entitled to all of the benefits
and profits arising from or incident to all work, service, and advice of the
Employee provided to the Company by the Employee.
16. (a) Trade Secrets of the Company. The Employee during the
term of employment under this Agreement will have access to and become
acquainted with various trade secrets, consisting of technical data, plans and
specifications, research and test results, feasibility studies, business plans,
financial records, customer lists, and other business documents, which are owned
by the Company, or its shareholders, and which are regularly used in the
operation of the business of the Company. The Employee shall not disclose any
of the aforesaid trade secrets, directly or indirectly, or use them in any way,
either during the term of this Agreement or at any time thereafter, except as
required in the course of his employment. All files, records, documents, plans,
and similar items relating to the business of the
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Employee or otherwise coming into his possession, shall remain the exclusive
property of the Company and shall not be removed under any circumstances from
the premises where the work of the Company is being carried on without the
prior written consent of the Company.
(a) Confidential Data of Customers and the Company. The
Employee in the course of his duties will or may be handling technical,
statistical, and planning data on the future plans and requirements for
customers and/or potential customers of the Company, and similar material
pertaining to the Company's shareholders. All such data is confidential and
shall not be disclosed, directly or indirectly, or used by the Employee in any
way, either during the term of this Agreement or at any time thereafter, except
as required in the course of Employee's employment.
(b) Inventions by Employee. All concepts, designs, ideas,
inventions, knowhow, and industrial property rights (hereinafter called
"Inventions") created, devised or improved by the Employee during the term of
employment relating to the business of the Company shall be the sole and
exclusive property of the Company and shall be treated in a confidential manner
pursuant to subsection 16(a) above. The Employee shall fully disclose all such
Inventions to the Company. The handling of any Inventions made by the Employee
during the employment term shall be governed by the provisions set forth below:
(i) The Employee agrees that any Inventions made
by the Employee, solely or jointly with others, during the term of this
Agreement, that are made with the Company's equipment, supplies,
facilities, trade secrets, or time; or that relate, at the time of
conception or of reduction to practice, to the business of the Company
or to the Company or the Company's actual or demonstrably anticipated
research or development; or that result from any work performed by the
Employee for the Company, shall belong to the Company, and promises to
assign all such Inventions to the Company.
(ii) The Employee also agrees that the Company
shall have the right to keep any such Inventions as trade secrets, if
the Company so chooses.
(iii) The Employee agrees to assign to the Company
all rights in any other inventions.
(iv) In order to permit the Company to claim rights
to which it may be entitled, the Employee agrees to disclose to the
Company in confidence all Inventions that Employee makes during the
course of his employment and all patent applications filed by the
Employee within a year after termination of his employment.
(v) The Employee shall assist the Company in
obtaining patents on all Inventions, designs, improvements, and
discoveries deemed patentable by the Company in the United States and
in all foreign countries, and shall execute all documents and do all
things necessary to obtain letters patent, to vest the Company with full
and exclusive title thereto, and to protect the same against
infringement by others.
(vi) For the purposes of this Agreement, an
Invention is deemed to have been made during the period of the
Employee's employment if the Invention was conceived or first actually
reduced to practice during that period, and the Employee agrees that any
patent application filed within one year after termination of his
employment hereunder shall be presumed to relate to an invention made
during the term of the
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Employee's employment unless the Employee can provide conclusive written
evidence to the contrary.
17. During the term of this Agreement, the Employee agrees
that he will not, directly or indirectly, be interested in any manner as
partner, officer, director, stockholder (other than a passive investor, which
shall be defined as ownership of less than 1% of the equity of a publicly
traded corporation or association), consultant, advisor, employee or in any
other capacity in or with respect to any other firm, corporation, partnership,
trust, association or organization which is engaged in any line of business
in any geographical area in which the Company is engaged or has under
development.
After the date of the termination of Employee's employment, whether
pursuant to Section 13 hereof or otherwise, Employee agrees that he will not,
during the period commencing on the date of termination and ending on the later
of (i) September 30, 1998 or (ii) 365 days after termination, directly or
indirectly, be interested in any manner as partner, officer, director,
stockholder (other than a passive investor, which shall be defined as ownership
of less than 1% of the equity of a publicly traded corporation or association),
consultant, advisor, employee or in any other capacity in or with respect to any
other firm, corporation, partnership, trust, association or organization which
is engaged in any line of business in which the Company is engaged or has under
development in any county of any state in which the Company is doing business.
After the date of the termination of Employee's employment,
whether pursuant to Section 13 hereof or otherwise, Employee agrees that he
will not, during the period commencing on the date of termination and ending on
the later of (a) September 30, 1998, and (b) 365 days after termination,
directly or indirectly, (i) entice, induce, solicit, or encourage any employee
to leave the employ of the Company to engage in any line of business in which
the Company is engaged or has under development as of the date of termination
of Employee's employment with the Company or (ii) hire any other employee of
the Company to engage in any line of business if such employee's base salary
and any fixed or guaranteed bonus per year will be more than $50,000.
18. In the event that any court or tribunal of proper jurisdiction
and venue shall find that the restrictions contained in Section 17 above are
unreasonable, the parties agree that such court shall determine a reasonable
time and/or geographical area for such restrictions. To the extent that any
other obligations set forth in this Agreement shall be declared invalid or
unenforceable, said clause of obligation shall be deemed to be severable, and
the remaining obligations imposed by the provisions of this Agreement shall be
fully enforceable as if such invalid or unenforceable provisions had not been
included herein.
19. The Employee agrees that the remedy at law for any breach or
threatened breach of the restrictions contained in Section 17 above will be
inadequate, and that any breach or threatened breach would cause immediate and
permanent damages as would be impossible to ascertain. Therefore, the Employee
agrees that in the event of any breach or threatened breach of any provisions of
Section 17 above by him, in addition to any and all legal, equitable and
arbitral remedies available to the Company for such breach or threatened breach,
including a recovery of damages, the Company shall be entitled to obtain in any
court or tribunal having jurisdiction preliminary or permanent injunctive relief
without the necessity of proving actual damage by reason of such breach, and to
the extent permissible under the application statutes and rules of procedure, a
temporary restraining order may be granted immediately upon commencement of such
action.
20. The Employee represents and warrants that (a) he is
not a party to or bound by any agreement or subject to any restriction or
limitation, whether written, oral or arising out of any prior or
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current relationship, which would be violated or impaired by his entering into,
and performing for the Company his obligations under this Agreement and (b) he
does not possess confidential information arising out of any such relationship
which would be utilized in connection with his employment by the Company.
21. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the employment and
understandings between the parties with respect to the employment contemplated
herein and sets forth a complete agreement and understanding of the parties.
No change, termination or attempted waiver of any of the provisions of this
Agreement shall be of any force or effect unless the same is set forth in
writing, duly adopted by written resolution of the Board, and duly executed
by the party against which it is sought to be enforced.
22. The failure of either party to insist in one or
more instances upon the terms and conditions of this Agreement, or to exercise
any right hereunder, shall not be construed as a waiver of the future
performance of any such term or the future exercise of such right, and the
obligation of each party with respect to such future performance shall continue
in full force and effect.
23. It is the intention of the Company and the Employee
that this Agreement and the performance hereunder and all suits and special
proceedings that might be brought pursuant hereto be construed in accordance
with the laws of the State of California, and that in any action, special
proceeding, or other proceeding that may be brought arising out of, or in
connection with, or by reason of this Agreement, the laws of the State of
California shall be applicable and shall govern to the exclusion of the law of
any other forum, without regard to the jurisdiction in which any action or
special proceeding may be instituted.
24. Any controversy or claim arising out of or relating
to this Agreement or its interpretation or the breach thereof shall be
determined by arbitration before the American Arbitration Association, which
arbitration shall be held in Los Angeles, California in accordance with the
Commercial Arbitration Rules of said American Arbitration Association. The
award of the arbitrator shall be final and binding on the parties and may be
entered as a judgement or decree in any court having jurisdiction of such
proceedings. The costs and legal fees of all parties to any arbitration
proceeding shall be borne by the party against whom the award is made.
25. This Agreement is not assignable by the Employee,
but is assignable by the Company to any subsidiary, parent, affiliated or
associated company or any company which purchases the assets of the Company.
As used herein, the term "the Company" shall include any company to which this
Agreement shall have been assigned.
26. Any and all notices, requests, demands or other
communications hereunder shall be in writing and shall be deemed given when
delivered personally or sent by certified mail or registered mail, postage
prepaid to each of the parties at the following addresses:
Employee: John W. Hesse
22555 Ponderay Drive
West Linn, OR 97068
Tel.: 503-557-1242
Fax.: 503-557-1637
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The Company: Protection One, Inc.
6011 Bristol Parkway
Culver City, CA 90230
Attn: James M. Mackenzie, Jr.
Tel.: 310-649-0314
Fax.: 310-649-3855
with a copy to: Patricof & Co. Ventures, Inc.
545 Madison Avenue
New York, NY 10022
Attn: Robert M. Chefitz
Tel.: 212-753-6300
Fax.: 212-319-6155
Mitchell, Silberberg & Knupp LLP
1377 West Olympic Boulevard
Los Angeles, CA 90064-1683
Attn: Lessing E. Gold, Esq.
Tel.: 310-312-3228
Fax.: 310-312-3798
Any party may change his address for the purposes of this
paragraph by giving written notice of such change to the other party in the
manner herein provided for giving notice.
____________________
IN WITNESS WHEREOF, the parties hereto have executed this
Amended and Restated Employment Agreement as of the day and year first written
above.
PROTECTION ONE, INC.
By: /s/ James M. Mackenzie, Jr. John W. Hesse
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James M. Mackenzie, Jr. JOHN W. HESSE
President