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Exhibit 10.1
PROTECTION ONE, INC.
1994 STOCK OPTION PLAN
(As amended through Janaury 29, 1997)
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).
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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
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 1,300,000 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
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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 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
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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, 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.
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(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.
(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.
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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 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
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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 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.
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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 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.
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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 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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