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EXHIBIT 10.23
PROTECTION ONE, INC.
1994 STOCK OPTION PLAN
(As amended through October 3, 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"), and
of the Company's subsidiaries, to assist the Company and its subsidiaries 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 Board of Directors or a
committee thereof designated by the Board of Directors, which committee (THE
"COMMITTEE") may be the Compensation Committee of the Board of Directors as
shall be designated by the Board of Directors; provided, however, that with
respect to grants of Options to persons who are then subject to Section 16 of
the Securities Exchange Act of 1934, as amended (THE "1934 ACT"), the Plan shall
at all times be administered so as to permit the Plan to comply with Rule 16b-3
under the 1934 Act or any successor thereto ("RULE 16B-3") and that any
Committee shall be so constituted so as to satisfy the legal requirements
relating to the administration of incentive stock option plans, if any, of
Delaware corporate and securities laws and of the Internal Revenue Code of 1986,
as from time to time amended (THE "IRC"). Once appointed, the Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. If permitted by Rule 16b-3, the Plan may be administered by different
bodies with respect to directors, non-director officers and employees who are
neither directors nor officers of the Company. If and to the extent the Plan is
then being administered by the Board, the Board shall have all authority and
each and all of the powers granted to the Committee by this Plan (including,
without limitation, Sections 3.2, 3.3, 3.4 and 6).
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
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actions set forth in Section 6, the making of all required or appropriate
determinations under this Plan, 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
Option or "Agreement" (as hereinafter defined) 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 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 the Committee 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 IRC, as such section may from time to time be
amended or supplemented ("SECTION 422"), 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 amount payable
by the participant upon the exercise of such Option (THE "EXERCISE PRICE"),
which price shall not be less than the minimum specified in
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Section 7.1, (v) to determine the time or times when each Option shall become
exercisable, the objectives or conditions, if any, to such exercise and the
duration of the exercise period, and (vi) to prescribe the form or forms of the
agreement or instrument reflecting the terms and conditions of each Option (THE
"AGREEMENTS").
The Committee also shall have full power and authority to delegate
to one or more of the executive officers of the Company, as the Committee deems
appropriate, (i) the selection of participants to whom Options shall be granted;
(ii) the determination of the number of shares of Common Stock purchasable upon
the exercise of each such Option and the Exercise Price thereof; (iii) the other
terms and conditions of each such Option and the applicable Agreement, including
without limitation establishing the objectives and conditions, if any, for the
earning or vesting of such Option; and (iv) the right to interpret and construe
each provision of this Plan as applicable to such Option; provided, however,
that no Option may be granted or other determination made pursuant to this
paragraph to any person who (i) is a "covered employee" within the meaning of
Section 162(m) of the IRC or who, in the Committee's judgment, is likely to be a
covered employee at any time during the period the Option granted to such
employee would be outstanding or (ii) an officer or other person subject to
Section 16 of the 1934 Act.
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 and that the Exercise Price of any ISO granted
to a person who, at the time of such grant, owns capital stock possessing more
than 10% of the total combined voting power of all classes of capital stock of
the Company or of subsidiary of the Company (A "TEN PERCENT HOLDER") shall be
the price (currently 110% of fair market value of a share of Common Stock)
required by the IRC in order to constitute an ISO.
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 or its designated agent of an executed
irrevocable option exercise form together with irrevocable instructions to a
financial institution or broker-dealer approved by the Company to sell or margin
a sufficient portion of the shares and deliver the sale or margin loan proceeds
directly to the Company to pay the Exercise Price, such instructions to be in
such form is acceptable to 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
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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,
however, that (i) no ISO shall be exercisable after the expiration of 10 years
after the grant date, (ii) no ISO granted to a Ten Percent Holder shall be
exercisable after the expiration of five years after the grant date, and (iii)
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.
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 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 a disability of the participant that is not a "permanent and
total disability" as defined in Section 22(e)(3) 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.
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(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" (as defined in Section 22(e)(3) of the
IRC) 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 distributee. 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
or such other amount as may be established by the Code.
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
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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 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.
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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 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.
With respect to grants of Options to persons are then subject to
Section 16 of the 1934 Act, 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. An Agreement may provide that the
participant may satisfy any such obligation by any of the following means: (i) a
cash payment to the Company by the participant, (ii) delivery to the Company of
previously owned shares of Common Stock that the participant has held for at
least six months prior to the delivery of such shares or that the
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participant purchased on the open market and for which the purchaser has good
and marketable title, free and clear of any security interest, lien or
encumbrance, having an aggregate fair mated value, determined as of the date the
obligation to withhold or pay taxes arises in connection with the Option (THE
"TAX DATE"), equal to the amount necessary to satisfy any such obligation, (iii)
a cash payment to the Company by a broker-dealer acceptable to the Company to
whom the purchaser has submitted an irrevocable notice of exercise, or (iv) the
withholding by the Company from the shares of Common Stock to be issued upon
exercise of the Option that number of shares having a fair market on the Tax
Date equal to the amount required to be withheld; provided, however, that the
Committee shall have sole discretion to disapprove of an election pursuant to
clauses (ii) or (iii) and that if the participant is a person subject to Section
16 of the 1934 Act, the Company may require that the method of satisfying any
such withholding obligation be in compliance with said Section 16 and Rule 16b-3
thereunder.
17. TRANSFERABILITY.
No Incentive Stock 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 or distribution, and an Incentive
Stock Option may be exercised during the participant's lifetime only by the
participant or the participant's legal representative.
No NQSO may be in any way transferred, assigned, pledged or
hypothecated by the participant to which that NQSO was granted or awarded other
than by will or the laws of descent or distribution or, if and to the extent
that the Agreement governing such NQSO so provides, to a family member of such
participant, to a trust established for the benefit of such participant or
family member or to a qualified charity (as defined in the Agreement). A NQSO
may be exercised during the participant's lifetime only by the participant or
the participant's legal representative or, if applicable Agreement so provides,
by a permitted transferee or his or her legal representative. Notwithstanding
the foregoing, the Committee may upon request consent to such additional
transfers of NQSO's as the Committee 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 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
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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.
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