AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
PROTECTION ONE, INC. PROTECTION ONE ALARM MONITORING, INC.
(Exact Name of Registrant as Specified in Its Charter) (Exact Name of Registrant as Specified in Its Charter)
DELAWARE 92-1063813 DELAWARE 93-1064579
(State or Other Jurisdiction of (I.R.S. Employer (State or Other Jurisdiction (I.R.S. Employer
Incorporation or Organization) Identification No.) of Incorporation or Identification No.)
Organization)
7382
(Primary Standard Industrial Classification Code Number)
For Co-Registrants, please see "Table of Co-Registrants"
JOHN E. MACK III
CHIEF EXECUTIVE OFFICER
PROTECTION ONE, INC.
600 CORPORATE POINTE, 12TH FLOOR 600 CORPORATE POINTE, 12TH FLOOR
CULVER CITY, CALIFORNIA 90230 CULVER CITY, CALIFORNIA 90230
(310) 342-6300 (310) 342-6300
(Address, Including Zip Code, and Telephone (Name, Address, Including Zip
Code, and
Number, Including Area Code, of Registrants' Telephone Number, Including Area
Principal Executive Office) Code, of Agent For Service)
Copies to:
JEREMY W. DICKENS
WEIL, GOTSHAL & MANGES LLP
100 CRESCENT COURT, SUITE 1300
DALLAS, TEXAS 75201
(214) 746-7700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is a compliance
with General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an offering
under Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed under the Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
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CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE(1)
--------------------------- ---------- -------- -------------- ------
8 1/8% Series B Senior
Subordinated Notes due 2009. $ 350,000,000 N/A $ 350,000,000 $ 97,300
Senior Subordinated Guarantees N/A N/A N/A N/A
(1) Calculated in compliance Rule 457(f) under the Securities Act of 1933.
THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON THE DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
CO-REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN COMPLIANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON THE DATE AS THE SEC, ACTING UNDER SECTION 8(A), MAY
DETERMINE.
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DA1:\165065\05\3jd505!.DOC\68523.0005
TABLE OF CO-REGISTRANTS
PRIMARY STANDARD IRS
STATE OR OTHER INDUSTRIAL EMPLOYER
JURISDICTION OF CLASSIFICATION IDENTIFICATION
NAME INCORPORATION CODE NUMBER NUMBER
---- ------------- ----------- ------
Network Multi-Family Security Corporation.............. Delaware 7382 75-2050133
Protection One International, Inc...................... Delaware 7382 95-4716135
Comsec/Narragansett Security, Inc...................... Delaware 7382 06-1093130
Protection One Investments, Inc........................ Delaware 7382 95-4716134
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED APRIL 29, 1999
PROSPECTUS
$350,000,000
PROTECTION ONE ALARM MONITORING, INC.
(GUARANTEED BY PROTECTION ONE, INC. AND OTHER OF ITS SUBSIDIARIES)
OFFER TO EXCHANGE
REGISTERED SERIES B 8 1/8% SENIOR SUBORDINATED NOTES DUE 2009
FOR ANY AND ALL
OUTSTANDING 8 1/8% SENIOR SUBORDINATED NOTES DUE 2009
o The exchange offer will expire at 5:00 p.m., New York City time on , 1999,
unless we extend this date.
o All outstanding notes that you validly tender and do not withdraw will be
exchanged.
o If you decide to participate in this exchange offer, the registered notes
you receive will be the same as your outstanding notes, except that, unlike
your outstanding notes, you will be able to offer and sell the registered
notes freely to any potential buyer in the United States.
o We will not receive any proceeds from the exchange offer.
o You will not owe additional federal income taxes if you exchange your
outstanding notes.
o You may withdraw your tender of outstanding notes at any time before the
expiration of the exchange offer.
--------------------
We are not making this exchange offer in any state where the exchange offer
is not permitted.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the registered notes to be issued in
the exchange offer, nor have any of these organizations determined that this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
WE URGE YOU TO READ THE "RISK FACTORS" SECTION OF THIS PROSPECTUS BEGINNING
ON PAGE 8, WHICH DESCRIBES INFORMATION YOU SHOULD CONSIDER BEFORE PARTICIPATING
IN THE EXCHANGE OFFER.
--------------------
, 1999
PROSPECTUS SUMMARY
The following summary highlights the key terms of the exchange offer
and the registered notes being offered to you. We encourage you to read this
prospectus in its entirety. Unless the context requires otherwise, "we," "our"
or similar terms refer only to Protection One Alarm Monitoring, Inc. and not to
Protection One, Inc., its subsidiaries or its predecessors. The outstanding
notes and the registered notes are referred to collectively herein as the
"notes."
On December 21, 1998, we completed the private offering of $350,000,000
principal amount of 81/8% Senior Subordinated notes due 2009. These outstanding
notes are guaranteed by our parent, Protection One, Inc., and all of our
domestic subsidiaries that guarantee other of our indebtedness. We and these
guarantors entered into a registration rights agreement with the initial
purchasers in the private offering in which we agreed, among other things, to
deliver this prospectus to you and to use our reasonable best efforts to
consummate the exchange offer by June 21, 1999. As a holder of outstanding
notes, you are entitled to exchange in the exchange offer your unregistered
notes for a new series of notes which we have registered under the Securities
Act and which have substantially identical terms. We are obligated to pay
additional interest on the notes if we do not consummate the exchange offer by
June 21, 1999. You should read the discussion under the heading "Summary of
Terms of the Registered Notes" and "Description of the Registered Notes" for
further information regarding the registered notes.
We believe that the registered notes issued in the exchange offer may
be resold by you without compliance with the registration and prospectus
delivery provisions of the Securities Act, subject to some conditions. Following
the exchange offer, any outstanding notes held by you that are not exchanged in
the exchange offer will continue to have the existing restrictions on transfer
on these notes and, except in some circumstances, we will have no further
obligation to you to provide for registration under the Securities Act of
transfers of the notes held by you. You should read the discussion under the
headings "Summary of the Exchange Offer" and "The Exchange Offer" for further
information regarding the exchange offer and the resale of notes.
1
SUMMARY OF MATERIAL TERMS OF THE EXCHANGE OFFER
ISSUER ........................... Protection One Alarm Monitoring, Inc., a
wholly owned subsidiary of Protection One,
Inc.
GUARANTORS ....................... The payment obligations of the registered
notes will be fully and unconditionally
guaranteed by Protection One, Inc., as well
as Protection One International, Inc.,
Protection One Investments, Inc., Network
MultiFamily Security Corporation and Comsec
Narragansett Security, Inc., all of which
are direct or indirect wholly owned domestic
subsidiaries of Protection One, Inc.
SECURITIES OFFERED ............... $350,000,000 aggregate principal amount of
Series B 81/8% Senior Subordinates notes due
2009, which we have registered under the
Securities Act.
REGISTRATION RIGHTS AGREEMENT .... You have the right to exchange your
outstanding notes for registered notes with
substantially identical terms. This exchange
offer is being made to satisfy these rights.
Except in limited circumstances described
under "The Exchange Offer -- Purpose and
Effect," after the exchange offer is
complete, you will no longer be entitled to
any exchange or registration rights with
respect to your outstanding or registered
notes.
THE EXCHANGE OFFER ............... We are offering to exchange $1,000 principal
amount of our registered notes for each
$1,000 principal amount of our unregistered
outstanding 81/8% Senior Subordinated notes
due 2009, which we issued in December 1998
in a private offering. In order to be
exchanged, an outstanding note must be
properly tendered and accepted. All
outstanding notes that are validly tendered
and not validly withdrawn will be exchanged.
As of this date, there is $350,000,000
principal amount of notes outstanding. We
will issue the registered notes promptly
after the expiration of the exchange offer.
RESALES .......................... We believe that the registered notes issued
in the exchange offer may be offered for
resale, resold and otherwise transferred by
you without compliance with the registration
and prospectus delivery provisions of the
Securities Act provided that:
o the registered notes issued in the
exchange offer are being acquired
in the ordinary course of your
business;
o you are not participating, do not
intend to participate and have no
arrangement or understanding with
any person to participate, in the
distribution of the registered
2
notes issued to you in the exchange
offer; and
o you are not an "affiliate" of our
company.
If our belief is inaccurate and you transfer
any registered note issued to you in the
exchange offer without delivering a
prospectus meeting the requirements of the
Securities Act or without an exemption from
registration of your notes from these
requirements, you may incur liability under
the Securities Act. We do not assume, or
indemnify you against, this liability.
Each broker-dealer that issued registered
notes in the exchange offer for its own
account in exchange for notes which were
acquired by it as a result of market-making
or other trading activities, must
acknowledge that it will deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resale
of the registered notes issued in the
exchange offer. A broker-dealer may use this
prospectus for an offer to resell, resale or
other retransfer of the registered notes
issued to it in the exchange offer.
The exchange offer is not being made to, nor
will we accept surrenders for exchange from,
the following:
o holders of outstanding notes in any
jurisdiction in which this exchange
offer or the acceptance of the
exchange offer would not be in
compliance with the applicable
securities or "blue sky" laws of
that jurisdiction; and
o holders of outstanding notes who
are affiliates of our company.
RECORD DATE ...................... We mailed this prospectus and the related
exchange offer documents to registered
holders of outstanding notes on , 1999.
EXPIRATION DATE .................. The exchange offer will expire at 5:00 p.m.,
New York City time, , 1999, unless we decide
to extend this expiration date.
CONDITIONS TO THE EXCHANGE OFFER . We may terminate or amend the exchange offer
if:
o any legal proceeding, government
action or other adverse development
materially impairs our ability to
complete the exchange offer; or
o any SEC rule, regulation or
interpretation materially impairs
the exchange offer.
We may waive any or all of these conditions.
At this time, there are no adverse
3
proceedings, actions or developments pending
or, to our knowledge, threatened and no
governmental approvals are necessary to
complete the exchange offer.
PROCEDURES FOR TENDERING
OUTSTANDING NOTES .............. you wish to tender your outstanding notes
for exchange and accept the exchange offer
you must transmit to The Bank of New York,
as exchange agent, on or before the
expiration date either:
o a properly completed and duly
executed letter of transmittal,
which accompanies this prospectus,
or a facsimile of the letter of
transmittal, together with your
outstanding notes and any other
required documentation, to The Bank
of New York at the address found in
this prospectus under the heading
"The Exchange Offer--Exchange
Agent," and on the front cover of
the letter of transmittal; or
o a computer generated message
transmitted by means of the
Automated Tender Offer Program, or
ATOP, system operated by The
Depository Trust Company and
received by The Bank of New York
and forming a part of a
confirmation of book entry transfer
in which you acknowledge and agree
to be bound by the terms of the
letter of transmittal.
If either of these procedures cannot be
satisfied on a timely basis, then you should
comply with the guaranteed delivery
procedures described below.
By executing the letter of transmittal, you
will be representing, among other things,
that:
o you are acquiring the registered
notes in the exchange offer in the
ordinary course of your business;
o you are not participating, do not
intend to participate, and have no
arrangement or understanding with
any person to participate, in the
distribution of the registered
notes issued to you in the exchange
offer; and
o you are not an "affiliate" of our
company.
UNTENDERED OUTSTANDING NOTES ..... If you are eligible to participate in the
exchange offer and you do not tender your
outstanding notes, you will not have any
further registration or exchange rights and
your outstanding notes will continue to have
restrictions on transfer. These unregistered
notes may not be offered or sold, unless
registered under the Securities Act and
4
applicable state securities laws or pursuant
to an exemption from the Securities Act or
these securities laws. We do not currently
plan to register the outstanding notes under
the Securities Act. Accordingly, the
liquidity of the market for the outstanding
notes could be adversely affected.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS .............. If you are a beneficial owner whose notes
are registered in the name of a broker,
dealer, commercial bank, trust company or
other nominee and you wish to tender your
outstanding notes in the exchange offer, you
should contact the registered holder
promptly and instruct the registered holder
to tender on your behalf. If you wish to
tender on your own behalf, you must, before
completing and executing the letter of
transmittal and delivering your outstanding
notes, either make appropriate arrangements
to register ownership of the outstanding
notes in your name or obtain a properly
completed bond power from the registered
holder.
The transfer of registered ownership may
take considerable time and may not be able
to be completed before the expiration date.
GUARANTEED DELIVERY PROCEDURE .... If you wish to tender your outstanding notes
and time will not permit your required
documents to reach The Bank of New York by
the expiration date of the exchange offer,
or you cannot complete the procedure for
book-entry transfer on time or you cannot
deliver certificates for your outstanding
notes on time, you may tender your
outstanding notes under the procedures
described in this prospectus under the
heading "The Exchange Offer --Guaranteed
Delivery Procedures."
WITHDRAWAL RIGHTS ................ You may withdraw the tender of your
outstanding notes at any time before the
expiration of the exchange offer on the
expiration date.
FEDERAL INCOME TAX CONSIDERATIONS. The exchange of outstanding notes for
registered notes will not be a taxable event
for United States federal income tax
purposes.
USE OF PROCEEDS .................. We will not receive any proceeds from the
issuance of the registered notes under the
exchange offer. We will pay all of the
expenses incident to the exchange offer.
EXCHANGE AGENT ................... The Bank of New York is serving as the
exchange agent in connection with the
exchange offer.
Please review the information on page 18 under "The Exchange Offer" for
more detailed information concerning the exchange offer.
5
SUMMARY OF TERMS OF THE REGISTERED NOTES
We will pay interest on the registered notes in the same manner as the
outstanding notes. You should be aware that the indenture that currently governs
your outstanding notes is the same indenture that will govern the registered
notes, except there will be no restrictions on your sale of registered notes.
Interest Payment Dates.................... January 15, and July 15 of each
year, commencing on July 15, 1999.
Optional Redemption....................... We may redeem any of the registered
notes at any time at the redemption
price described herein, plus accrued
interest, if any.
Change of Ownership of the Issuer......... If we have a change of ownership, we
will be required to offer to
purchase the notes from you at a
purchase price equal to 101% of
their principal amount, plus accrued
and unpaid interest, if any, to the
date of repurchase. We may not have
sufficient funds at the time of any
change of ownership to make any
required debt repayment, including
repurchases of your registered
notes.
Guarantees of the Registered Notes........ Our parent and our domestic
subsidiaries on the issue date, as
well as future domestic subsidiaries
that guarantee our credit facility
or other indebtedness, will
guarantee the registered notes on an
unsecured senior subordinated basis.
These guarantees will rank junior in
right of payment to the guarantors'
senior indebtedness and equal in
right of payment to any of the
guarantors' senior subordinated
indebtedness. Each guarantor will
guarantee the entire principal
amount of your registered notes. The
guarantees rank first in right of
payment before all of their junior
or lower ranked debt. The guarantors
do not secure payment of the
guarantees by any of their assets.
As a result, if any guarantor goes
bankrupt, its secured creditors will
be assured of payment from its
assets before your claims are paid
under the guarantee.
Ranking................................... The registered notes:
o are not secured by any
assets of the issuer;
o will be subordinated to
all of our senior
indebtedness;
o will rank equally with
all of our senior
subordinated
indebtedness; and
o will be senior to all of
our subordinated
indebtedness.
Key Covenants............................. The indenture under which we will
issue the registered notes contains
covenants for your benefit which
restrict our ability or the
guarantors to, among other things:
o borrow additional money;
o pay dividends on or
redeem their capital
stock, or make other
restricted payments or
investments;
o sell assets;
o merge or consolidate with
any other person; or
6
o effect a consolidation or
merger.
However, these limitations will have
a number of important qualifications
and exceptions. If the registered
notes attain Investment Grade Status
(as defined herein), substantially
all of these covenants will cease to
apply.
Form of the Registered notes.............. One or more permanent global
securities, in fully registered
form, will represent the registered
notes. We will deposit the
registered notes with The Bank of
New York, as custodian for The
Depository Trust Company The
registered notes will be registered
in the name of a nominee of The
Depository Trust Company, as the
depositary. The Depository Trust
Company and its participants will
maintain records in book-entry form
showing beneficial interests in the
registered notes and transfers of
these interests.
Absence of a Public Market................ We cannot assure you that a public
market for the registered notes will
develop in the future or, if
developed, will continue. Morgan
Stanley & Co., Inc., Chase
Securities, Inc., First Union
Capital Markets, NationsBanc
Montgomery Securities LLC and TD
Securities were the initial
purchasers and have advised us that
they currently intend to make a
market in the registered notes.
However, the initial purchasers have
no obligation to make a market and
they may discontinue any market
making with respect to the
registered notes at any time without
notice. We do not intend to list the
registered notes on any securities
exchange or to seek approval for
their quotation on Nasdaq or any
other automated quotation system.
This could affect your ability to
sell the registered notes.
7
RISK FACTORS
Ownership of the outstanding notes or the registered notes involves a
high degree of risk. Before making your decision to participate in the exchange
offer or invest in any registered notes, you should give careful consideration
to the following factors, as well as the other information in this prospectus
and in our filings with the SEC incorporated by reference in this prospectus.
YOU MAY NOT BE ABLE TO SELL YOUR OUTSTANDING NOTES IF YOU DO NOT EXCHANGE YOUR
OUTSTANDING NOTES FOR REGISTERED NOTES IN THE EXCHANGE OFFER
If you fail to exchange your outstanding notes for registered notes
under the exchange offer, your outstanding notes will continue to have transfer
restrictions found in:
o the provisions of the indenture regarding transfer and exchange
of your outstanding notes and
o the restrictions on transfer of your outstanding notes contained
in the restrictive legend found on your outstanding notes under
exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable
state securities laws.
In general, your outstanding notes may not be sold unless they are
registered under the Securities Act and applicable state securities laws. We do
not anticipate that we will register the outstanding notes under the Securities
Act. See the "Exchange Offer -- Purpose and Effect". Based on interpretations of
the staff of the SEC in no-action letters issued to third parties, we believe
that the registered notes issued under the exchange offer in exchange for your
outstanding notes may be offered for resale, resold, or otherwise transferred by
you, unless you are our "affiliate" within the meaning of Rule 405 under the
Securities Act, without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that you acquire your registered
notes:
o in the ordinary course of your business and
o unless you are a broker-dealer, you have no arrangement or
understanding with any person to participate in the distribution
of your registered notes.
The SEC has not, however, considered the exchange offer in the context of a
no-action letter and there can be no assurance that the staff of the SEC would
make a similar determination with respect to the exchange offer in other
circumstances.
Unless you are a broker-dealer, you must acknowledge that you are not
engaged in or intend to engage in or have any arrangement or understanding with
respect to the distribution of the registered notes to be acquired under the
exchange offer. If you are our affiliate or are engaged in or intend to engage
in, or have any arrangement or understanding with respect to the distribution of
the registered notes to be acquired under the exchange offer, you:
o may not rely on the applicable interpretations of the staff of
the SEC and
o must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction.
8
If you are a broker-dealer that receives registered notes for your own
account in exchange for your outstanding notes under the exchange offer, you
must acknowledge that your outstanding notes were acquired as a result of
market-making activities or other trading activities and that you will deliver a
prospectus in connection with any resale of your registered notes. If you are a
broker-dealer, you will not be deemed to admit that you are an "underwriter"
within the meaning of the Securities Act if you acknowledge your broker-dealer
status on the letter of transmittal and if you deliver a prospectus in
connection with any resale of your registered notes. This prospectus, as it may
be amended and supplemented from time to time, may be used by you if you are a
broker-dealer in connection with resales of registered notes received in
exchange for your outstanding notes where your outstanding notes were acquired
by you as a result of market-making activities or other trading activities. In
addition, for you to comply with the securities laws of some jurisdictions, if
applicable, your registered notes may not be offered or sold unless they have
been registered or qualified for sale in those jurisdictions or an exemption
from registration or qualification is available and complied with. We have
agreed, under the registration rights agreement and subject to some limitations
contained in the registration rights agreement, to cooperate with you to
register or qualify the registered notes for offer or sale under the securities
laws of the jurisdiction you may reasonably request. Unless you make a request,
we do not intend to register or qualify the sale of the registered notes in any
jurisdictions. See the "Exchange Offer."
IF A CHANGE IN OWNERSHIP OCCURS, WE MAY NOT HAVE SUFFICIENT FUNDS TO PAY YOUR
REGISTERED NOTES
Upon the occurrence of specific kinds of events which cause a change of
our ownership, we will be required to offer to repurchase all of the registered
notes. Our credit facility prohibits us from purchasing the notes and other debt
that ranks junior to the credit facility. Moreover, we may not have sufficient
funds at that time to make this repurchase of registered notes. The change in
ownership purchase feature of the registered notes may in some circumstances
discourage or make it more difficult for a sale or takeover our Company to take
place. For more information, see "Description of the Registered Notes -- Change
of Control."
THERE MAY NOT BE A PUBLIC MARKET FOR YOUR REGISTERED NOTES
Prior to the exchange offer, there was no public market for the
registered notes. We have been informed by the initial purchasers, Morgan
Stanley & Company Inc., Chase Securities Inc. First Union Capital Markets,
NationsBanc Montgomery Securities LLC and TD Securities, that they intend to
make a market in the registered notes after the exchange offer is completed. The
initial purchasers may, however, cease their market-making at any time. In
addition, the liquidity of the trading market in the registered notes, and the
market price quoted for the registered notes, may be adversely affected by
changes in the overall market for high yield securities and by changes in our
financial performance or prospects or in the prospects for companies in our
industry generally. As a result, you cannot be sure that an active trading
market will develop for your registered notes. We do not intend to apply for
listing or quotation of the registered notes on any securities exchange or stock
market. To the extent that outstanding notes are tendered and accepted in the
exchange offer, the market for the remaining untendered outstanding notes could
be adversely affected.
WE HAVE A SUBSTANTIAL AMOUNT OF DEBT, WHICH COULD LIMIT OUR GROWTH AND AFFECT
OUR FINANCIAL PERFORMANCE
We have, and will continue to have, a large amount of consolidated
indebtedness when compared to the equity of our stockholders. The terms of
various indentures and credit agreements that govern our indebtedness limit, but
do not prohibit, the incurrence of additional indebtedness. We expect to incur
additional indebtedness in the future to fund future acquisitions of subscriber
accounts.
9
Additionally, please be aware that:
o As of December 31, 1998, on a consolidated basis with Protection
One, Inc. and its subsidiaries, we had outstanding long-term
indebtedness, including capital leases, of approximately $927.0
million, total indebtedness of $969.2 million, an accumulated
deficit of $45.8 million and stockholders' equity of $1,345.1
million. Our ratio of total indebtedness to stockholders'
equity, calculated on a consolidated basis with Protection One,
Inc. and its subsidiaries, was 0.72 and total indebtedness to
total capitalization was 0.42 as of December 31, 1998.
o As of December 31, 1998, on a consolidated basis with Protection
One, Inc. and its subsidiaries, we and our consolidated
subsidiaries had approximately $42.4 million of debt
outstanding, or 4% of total indebtedness, bearing interest at a
weighted average floating interest rate of 6.8%. Therefore, our
financial results are and will continue to be affected by
changes in prevailing interest rates.
A large amount of indebtedness could have negative consequences, including,
without limitation:
o our ability to obtain additional financing in the future for
working capital, acquisitions of subscriber accounts, capital
expenditures, general corporate purposes or other purposes;
o our ability to withstand a downturn in our business or the
economy generally; and
o our ability to compete against other less leveraged companies
may be adversely affected.
Our ability to satisfy any payment obligations will depend, in large
part, on our performance, which will ultimately be affected by general economic
and business factors, many of which will be outside management's control. We
believe that the cash flow from operations combined with borrowings under our
credit facility will be enough to meet our expenses and interest obligations.
However, if these payment obligations can't be satisfied, we will be forced to
find alternative sources of funds by selling assets, restructuring, refinancing
debt or seeking additional equity capital. There can be no assurance that any of
these alternative sources would be available on satisfactory terms or at all.
OUR DEBT AGREEMENTS IMPOSE OPERATIONAL RESTRICTIONS ON US
Our credit facility requires us to maintain financial covenants, and
the indentures governing our public indentures require us to satisfy financial
covenants in order to borrow additional funds. The most restrictive of these
covenants are contained in the credit facility and require the following:
o Total debt to annualized EBITDA for the most recent quarter must
be less than 5.0 through December 31, 1999 and less than 4.5
thereafter;
o Annualized EBITDA for the most recent quarter to interest
expense for the latest four fiscal quarters must be greater than
2.75; and
o Senior debt to annualized EBITDA must be less than 4 to 1.
In each case, the ratio should reflect the impact of acquisitions and
other capital investments for the entire period covered by the calculation.
Moreover, we are required to obtain approval of the lenders under the credit
10
facility to make acquisitions valued at $125.0 million or more or in businesses
outside our current scope of operations. Our ability to comply with the ratios
and the tests will be affected by events outside our control and there can be no
assurance that we will meet those tests. A breach of any of the covenants or
failure to meet the tests could result in an event of default under the credit
facility, which would allow the lenders to declare all amounts outstanding
immediately due and payable. In the case of the credit facility, if we are
unable to pay the amounts due, the lenders could accelerate the indebtedness
under the credit facility, which would in turn be an event of default under our
various indentures governing our publicly held indebtedness. If the amounts
outstanding under the credit facility are accelerated, there can be no assurance
that our assets would be sufficient to repay the amount outstanding in full.
WE HAVE HAD A HISTORY OF LOSSES
We incurred a net loss of $2.5 million in 1998 (a net loss of $10.7
million excluding the effect of non-recurring income, net), $42.7 million
(restated) in 1997, and $0.7 million in 1996, and Westinghouse Security (our
predecessor for accounting purposes) reported net losses of $4.9 million, $5.9
million, $1.8 million and $9.2 million in fiscal 1996, 1995, 1994 and 1993,
respectively. These losses reflect, among other factors:
o substantial charges incurred by us and Westinghouse Security for
amortization of purchased customer accounts:
o interest incurred on indebtedness; and
o other charges required to manage operations.
The charges identified above will increase as we continue to purchase
customer accounts or increase indebtedness, or if interest rates on our
indebtedness increases. There can be no assurance that we will attain profitable
operations on an annual basis or at all.
THE COMPETITIVE MARKET FOR THE ACQUISITION OF ACCOUNTS MAY AFFECT OUR FUTURE
PROFITABILITY
A principal element of our business strategy will be to continue to
grow rapidly by acquiring portfolios of alarm monitoring accounts. During the
1992-1998 period, acquisitions were the primary source of our growth. Since
November 1997, we have completed in excess of 30 transactions, adding
approximately one million subscribers. Growth via our authorized dealer program
through which we acquire subscriber accounts has become an increasingly
important component of our growth. We compete with major firms, some of whom
have greater financial resources than we do, or may be willing to offer higher
prices than we are prepared to offer to purchase subscriber accounts. The effect
of competition may be to reduce the purchase opportunities available to us, thus
reducing our rate of growth, or to increase the price we pay for subscriber
accounts, which could have a material adverse effect on our return on investment
in such accounts on our business, and results of operations, financial
condition, prospects and ability to service debt.
THE INTEGRATION OF ACQUIRED BUSINESSES REQUIRES SUBSTANTIAL MANAGEMENT TIME AND
EFFORT, WHICH COULD DIVERT MANAGEMENT'S ATTENTION FROM OTHER MATTERS
Significant acquisitions, including the 1997 business combination with
the security businesses of Western Resources, Inc. and the pending acquisition
of Lifeline Systems, Inc., have and will place very significant demands on us
with respect to management, operational resources and financial and internal
control systems. Our future operating results will depend, in part, on our
ability to continue to implement and to improve our operating and financial
controls and to expand, to train and to manage our employee base. Significant
risks also exist in the consolidation of our systems, operations and
administrative functions. We also face risks associated with entering new lines
of business and will be dependent on the management of these business lines as
11
we integrate operations, systems and/or financial controls. Significant changes
in quarterly revenues and costs may result from the execution of this business
strategy, resulting in fluctuating financial results. Additionally, managing the
growth of the business may limit the time available to our management to attend
to other operational, financial and strategic issues.
WE COULD DISCOVER PROBLEMS WITH ACQUIRED BUSINESSES AFTER THEIR ACQUISITION
Acquisitions of subscriber account portfolios involve a number of
uncertainties. Sellers in smaller transactions typically do not have audited
historical financial information with respect to the acquired accounts.
Therefore, in making acquisition decisions, we have generally relied on
management's knowledge of the industry, due diligence procedures and
representations and warranties of the sellers. There can be no assurance that
these representations and warranties are or will be true and complete or, if
these representations and warranties are inaccurate, that we will be able to
uncover any inaccuracies in the course of its due diligence or recover damages
from the seller in an amount sufficient to fully compensate it for any resulting
losses. Risks associated with these uncertainties include, without limitation,
the following:
o the possibility of unanticipated problems not discovered prior
to the acquisition;
o additional expenses required to integrate the acquired company's
systems;
o higher than expected account customer losses; and
o for acquisitions that are structured as stock purchases of other
companies, the assumption of unexpected liabilities and losses
from the disposition of unnecessary or undesirable assets of the
acquired companies.
Also, because the primary consideration in acquiring a portfolio of
subscriber accounts is the monthly recurring revenue associated with the
purchased accounts, the price we have paid has customarily been directly tied to
such monthly recurring revenue. This price varies based on the number and
quality of accounts being purchased from the seller, the historical activity of
these acquired accounts, the anticipated profit margins and other factors.
An important aspect of our acquisition program is the integration of
customer accounts into our operations after purchase. We have consummated well
over 200 acquisitions since 1992 and have experienced nearly all of the problems
and challenges described in varying degrees. We have experienced acquisitions in
which the quality of the accounts purchased, as defined by monthly recurring
revenue, were not commensurate with our expectations. We have also experienced
circumstances where the integration of an acquisition required more time than
expected, often related to differences in, or the inadequacy of, software and
accounting systems of the seller. We have also experienced integration
challenges where the servicing of newly acquired customer accounts suffered due
to lack of coordination and systems. Depending upon the size, frequency and
location of acquisitions, the integration of customers may adversely affect our
provision of field repair services to existing customers, which may cause
customer losses to increase and monthly recurring revenue to decline. In
addition, if corporate or branch operations fail to integrate a substantial
portion of or do not adequately service acquired customer accounts, we may
experience higher rates of customer loss in the future.
WE WILL NEED ADDITIONAL FUNDING TO FINANCE OUR FUTURE GROWTH
Our purchases of customer accounts through the dealer program and
acquisitions of portfolios of customer accounts and new lines of business have
generated cash needs that exceed the net cash provided by our operating
activities. We intend to continue to pursue customer account growth through the
dealer program and acquisitions. As a result, we will need additional funding
from additional borrowings under our credit facility or through the sale of
additional securities in the future. Depending on the price at which new equity,
if any, is sold, the issuance of additional equity securities may dilute voting
power, percentage ownership and earnings per common share realized by then
current stockholders. Any inability to obtain funding through external financing
could adversely affect our ability to increase our customers, revenues and cash
12
flows from operations. There can be no assurance that we will be able to obtain
external funding on favorable terms or at all.
WE LOSE SOME OF OUR CUSTOMERS OVER TIME
We experience the loss of accounts as a result of, among other factors:
o relocation of customers;
o adverse financial and economic conditions; and
o competition from other alarm service companies.
In addition, we experience the loss of newly acquired accounts to the
extent we do not integrate or adequately service those accounts. Because some
acquired accounts are prepaid on an annual, semiannual or quarterly basis,
customer loss may not become evident for some time after an acquisition is
consummated. An increase in this rate of customer loss could have a material
adverse effect on our revenues and earnings.
We have not historically observed that the rate of customer loss is
correlated with the terms of the customer contracts; however, contracts with
shorter terms give rise to more instances in which a customer may choose to
terminate the relationship. Although the contract term varies due to the variety
and number of sources from which we acquired them, based on our standard form of
contract and the due diligence procedures we undertake in connection with
account acquisitions, management believes that substantially all of our customer
contracts provide for an initial term of one to five years. During the initial
term, customers may not cancel the agreement without fulfilling their payment
obligations, so customers that request cancellation during the initial term are
billed for the balance of the initial term. Similarly, we believe that
substantially all of our customer contracts include an "evergreen" provision,
whereby the contract automatically renews for one to five year periods unless
either party gives prior notice of cancellation, usually 30 to 90 days prior to
expiration of the initial or any renewal term. Therefore, customers may only
cancel their agreements by providing the required notice prior to expiration of
the initial or a renewal term.
When acquiring accounts, we seek under terms of the purchase agreement,
to withhold a portion of the purchase price as a partial reserve against a
greater than expected loss of customers. If the actual rate of customer loss for
the accounts acquired is greater than the assumed rate at the time of the
acquisition, and damages can not be recouped from the portion of the purchase
price held back from the seller, this loss of customers could have a material
adverse effect on our business, financial condition, results of operations,
prospects or ability to service our debt obligations. Moreover, there can be no
assurance that we will be able to obtain purchase price holdbacks in future
acquisitions, particularly acquisitions of large portfolios. We have no
assurance that actual rates of customer losses for acquired accounts will not be
greater than the rate we have assumed or historically incurred. Moreover, we are
not able to predict accurately the impact that acquired accounts will have on
the overall rate of customer losses.
As of December 31, 1998, our cost of intangible assets, net of
accumulated amortization, was approximately $2.2 billion, which constituted
approximately 87.7% of the book value of our total assets. In contrast to the
10-year life for amortization of subscriber accounts, we amortize goodwill over
a 40-year life. As a result of discussions with the SEC staff, we are reviewing
our methodology for amortizing customer accounts. While we believe our
amortization method is consistent with industry practices, a significant change
in the amortization method would likely have a material effect on our
consolidated results of operations. However, such a change would not reduce
EBITDA. We also believe that the use of a 40-year estimated useful life for
goodwill is appropriate because the many intangibles associated with our
acquisitions will survive the estimated useful life of our customer accounts and
management believes should add value to the organization over an extended period
of time.
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The effects of the gross number of lost customers have historically
been offset by a combination of factors that has resulted in an overall increase
in the number of customers and/or revenue, including:
o adding new accounts from customers who move into premises
previously occupied by prior customers and in which security
alarm systems are installed;
o conversions of accounts that were previously monitored by other
alarm companies to Protection One monitoring services;
o accounts for which we obtain a guarantee from the seller that
allows it to "put" back to the seller canceled accounts; and
o revenues from price increases and the sale of enhanced services.
There can be no assurance that actual future experience will be
consistent with our past experiences and assumptions based on these experiences.
There could be a material adverse effect on our business, financial condition,
results of operations, prospects or ability to service debt obligations if
actual account attrition significantly exceeds assumed attrition and the period
over which the cost of purchased subscriber accounts is amortized is shortened.
OUR RECENT ENTRANCE INTO EUROPE PRESENTS NEW OPERATIONAL CHALLENGES AND EXPOSES
US TO FOREIGN CURRENCY FLUCTUATION
As a result of our acquisitions of Compagnie Europeenne de Telesecurite
in France and Hambro Countrywide Security plc in the United Kingdom, we will
generate a portion of our revenues and operating income from operations in
Europe. Although our European operations did not generate any significant
earnings in 1998, they did generate approximately $44 million, or 10%, of
revenues in 1998. We currently do not engage in hedging activities intended to
offset the risk of exchange rate fluctuations, although we may in the future.
Both the revenues from international operations and obligations of CET and
Hambro denominated in foreign currency are subject in varying degrees to risks
inherent in doing business outside the United States. Such risks include
economic instability, currency exchange rate fluctuations, changes in import
duties, trade restrictions, work stoppages, currency restrictions, the ability
of CET to conduct business in the new European currency, known as the "euro,"
and other restraints and taxes. With respect to our exposure to fluctuations in
currency exchange rates, we anticipate that substantially all of our foreign
exchange transactions will be denominated in the euro (as discussed below). Any
significant change in the value of the currencies of the countries in which we
do business against the U.S. dollar could affect our ability to control our cost
structure and satisfy foreign denominated obligations, which, in turn, could
have a material adverse effect on our business, results of operations, financial
condition, prospects and ability to service debt. Furthermore, depreciation of
the value of the U.S. dollar against foreign currencies in which we transact
business may have a negative impact on the income from operations of foreign
operations.
On January 1, 1999, eleven of the fifteen member countries of the
European Union, not including the United Kingdom, established fixed conversion
rates between their sovereign currencies, known as the "legacy currencies," and
the euro. During a transition period from January 1, 1999 through December 31,
2001, legacy currencies will continue in use; however, the value of these
currencies will be set at fixed and irrevocable conversion rates to the euro.
Beginning in January 2002, new euro-denominated bills and coins will be issued
and the legacy currencies will be withdrawn from circulation. We are addressing
issues raised by the conversion to the euro, in ways such as adapting our
information technology systems and assessing whether cross-border price
transparency will limit CET's flexibility to charge different prices for similar
products. CET's efforts to adapt its systems differ at its various European
operations. Currently, none of CET's systems are capable of accommodating
euro-denominated invoicing and purchasing transactions. Management believes the
conversion to the euro has not affected our ability to subscribe new customers,
pay vendors and employees or otherwise service existing customers since January
1, 1999. To the extent that existing or prospective vendors, customers or
14
employees require CET to engage in euro-denominated transactions prior to CET's
implementing systems capable of accommodating euro transactions, CET could lose
these vendors, customers or employees. CET's significant European operations
have formulated plans to accommodate all euro-denominated transactions and
triangulation conventions by January 1, 2002.
OUR INCREASING RELIANCE ON DEALERS FOR GROWTH MEANS WE MUST CONTINUE TO ACQUIRE
ACCOUNTS IN AN INCREASINGLY COMPETITIVE MARKET
During the period 1995 through 1998, we increasingly began to rely on
independent dealers as a source for new accounts. We expect that this emphasis
will continue. Our dealer program competes with other major alarm monitoring
firms that also acquire accounts through these independent dealers. Some of
these firms with competitive dealer programs have substantial financial
resources, including ADT Operations, Inc., a subsidiary of Tyco International,
Inc., and the security subsidiaries of the Ameritech Corporation. We are also
aware of other national firms with competitive dealer programs including
Monitronics International, Inc., DMAC, as well as several large regional dealer
programs. There can be no assurance that we will be able to retain or expand our
current dealer base or that competitive offers to dealers will not require us to
pay higher prices to dealers for subscriber accounts than have previously been
paid. Such events could reduce our growth rate and increase our use of cash to
fund growth. A lower growth rate or higher use of cash could have a material
adverse effect on our business, financial condition, results of operations,
prospects and ability to service debt obligations.
DECLINES IN NEW CONSTRUCTION OF MULTI-FAMILY DWELLINGS MAY AFFECT OUR SALES IN
THIS MARKETPLACE
Demand for alarm monitoring services in the multi-family alarm
monitoring market is tied to the construction of new multi-family structures. We
believe that developers of multi-family dwellings view the provision of alarm
monitoring services as an added feature that can be used in marketing newly
developed condominiums, apartments and other multi-family structures.
Accordingly, we anticipate that the growth in the multi-family alarm monitoring
market will continue so long as there is a demand for new multi-family
dwellings. However, the real estate market in general is cyclical and, in the
event of a decline in the market for new multi-family dwellings, it is likely
that demand for our alarm monitoring services to multi-family dwellings would
also decline, which could negatively impact our results of operations.
WESTERN RESOURCES IS PROTECTION ONE'S PRINCIPAL STOCKHOLDER AND CONTROLS
PROTECTION ONE'S ACTIONS
Western Resources, through Westar Capital, Inc., a wholly owned
subsidiary of Western Resources, owned approximately 85.4% of the outstanding
common stock of Protection One as of December 31, 1998. Westar Capital has
indicated that it may acquire additional shares of Protection One common stock
prior to consummation of the Lifeline transaction in an amount sufficient for it
to maintain an ownership position in excess of 80% of the issued and outstanding
shares of Protection One common stock following the consummation of the
transaction, although it is not bound by any agreement with us that would either
obligate it to or prevent it from acquiring additional shares of Protection One
common stock prior to or after the transaction. As long as Westar Capital
continues to beneficially own in excess of 50% of the shares of Protection One
common stock outstanding, Westar Capital will be able to direct the election of
all directors of Protection One and exercise a controlling influence over our
business and affairs, including any determinations with respect to mergers or
other business combinations involving Protection One, our acquisition or
disposition of material assets and our incurrence of indebtedness and the
payment of dividends on Protection One common stock. Similarly, Westar Capital
will continue to have the power to determine matters submitted to a vote of
Protection One's stockholders without the consent of other stockholders, to
15
prevent or cause a change in control of Protection One and could take other
actions that might be favorable to Western Resources and Westar Capital, whether
or not these actions would be favorable to Protection One or its stockholders
generally.
WE FACE CHALLENGES ASSOCIATED WITH OUR OPERATIONAL REORGANIZATION
On December 9, 1998, we announced that we had reorganized our operating
structure into new divisions in order to better manage the increased scale and
scope of operations. We contemplate that, if we consummate the Lifeline
Acquisition, Lifeline will become another operating division. We also created a
non-operating Executive Division with the intent to focus senior management's
time on key strategic and capital formation initiatives. There can be no
assurance that we will be able to realize the intended benefits of its new
operating structure. Moreover, we face certain risks and uncertainties
associated with management and operational reorganizations, including those
relating to:
o changes in management responsibility and reporting structures
o potential lack of communications until new reporting and
communication structure becomes familiar
o potential loss of cohesive operational strategies and
o potential employee turnover.
If we are unable to manage successfully these risks and uncertainties,
there can be no assurance that the new operating structure will not have a
material adverse affect upon our business, financial condition, results of
operations, prospects and ability to service debt obligations.
FORWARD-LOOKING STATEMENTS
This prospectus and the materials incorporated by reference include
"forward-looking statements" intended to qualify for the safe harbor from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements generally can be identified as such because the
context of the statement includes words such as we "believe," "expect,"
"anticipate," or other words of similar import. Similarly, statements that
describe our objectives, plans or goals also are forward-looking statements. All
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from our expectations,
including, among others, the factors discussed above under "Risk Factors." These
forward-looking statements are made only as of the date of this prospectus or as
of the date of the material incorporated by reference and we undertake no
obligation to publicly update these forward-looking statements to reflect
subsequent events or circumstances, except as required by applicable laws.
RATIO OF EARNINGS TO FIXED CHARGES
In calculating the ratio of earnings to fixed charges, earnings consist
of income before income taxes plus fixed charges. Fixed charges consist of
interest expense and the component of rental expense believed by management to
be representative of the interest factor thereon. Earnings were insufficient to
cover fixed charges by approximately $8.8 million, $14.1 million and $1.0
million for Protection One, Inc. and its consolidated subsidiaries during the
years ended December 31, 1998, 1997 and 1996, respectively. For Protection One's
predecessor, earnings were insufficient to cover fixed charges by approximately
$7.8 million for the 53 weeks ended December 30, 1996, $9.6 million for the 52
weeks ended December 20, 1995, and $2.8 million for the 52 weeks ended December
20, 1994.
16
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the
registered notes in exchange for the outstanding notes. In consideration for
issuing the registered notes, we will receive outstanding notes in like original
principal amount at maturity. Outstanding notes received in the exchange offer
will be cancelled.
The net proceeds to us from the original issuance of the outstanding
notes, after deducting discount and estimated expenses, was approximately $342.8
million. We used those net proceeds to repay the outstanding borrowings under
our revolving credit facility and for general corporate purposes and working
capital. The revolving credit facility bears interest at a floating rate based
on LIBOR or similar short-term interest rate indices. At the time we repaid the
borrowings under the revolving credit facility, the weighted average rate for
all borrowing under the facility was approximately 6.8%. The borrowings under
the revolving credit facility were incurred to refinance the credit facility
previously provided by Protection One, Inc.'s corporate parent, Westar Capital,
Inc., which borrowings had been used to refinance promissory notes used to fund
various acquisitions and other growth in 1998.
17
THE EXCHANGE OFFER
PURPOSE AND EFFECT
On December 21, 1998, we sold the outstanding notes to the initial
purchasers. In connection with the sale of the outstanding notes, we entered
into a registration rights agreement with the initial purchasers, which requires
us to register the registered notes with the SEC and offer to exchange the
registered notes for your outstanding notes.
The registration rights agreement further provides that we shall use
our best efforts to cause the registration statement to be declared effective on
or before June 21, 1999, or the annual interest rate borne by the outstanding
notes will be increased 0.50% per year until the exchange offer is consummated.
Except as discussed below, upon the completion of the exchange offer we will
have no further obligations to register your notes.
We want to advise you that a copy of the registration rights agreement
has been filed with the SEC as an exhibit to our annual report on Form 10-K for
fiscal 1998 and we strongly encourage you to read the entire text of the
registration rights agreement. See "Where You Can Find More Information." We
expressly qualify all of our discussions of the registration rights agreement by
the terms of the agreement itself. We need representations from you before you
can participate in the exchange offer. In order to participate in the exchange
offer, we require that you represent to us that:
o you are acquiring the registered notes in the ordinary course of
your business;
o neither you nor any other person is engaging in or intend to
engage in a distribution of your registered notes;
o neither you nor any other person has an arrangement or
understanding with any person to participate in the distribution
of the registered notes;
o neither you nor any other person is our "affiliate," as defined
under Rule 405 of the Securities Act; and
o if you or any other person is a broker-dealer, you will receive
registered notes for your own account, your registered notes
were acquired as a result of market-making activities or other
trading activities, and you will be required to acknowledge that
you will deliver a prospectus in connection with any resale of
your registered notes.
You may be entitled to "shelf" registration rights. Under the
registration rights agreements, we are required to file a shelf registration
statement for a continuous offering in compliance with Rule 415 of the
Securities Act if:
o we are not permitted to effect the exchange offer because of any
change in law or applicable interpretations of the staff of the
SEC;
o we do not consummate the exchange offer by June 21, 1999;
o you request us to do so following the exchange offer;
o any applicable law or interpretations do not permit you to
participate in the exchange offer;
o you do not receive freely transferable registered notes in
exchange for your outstanding notes; or
o we so elect.
In the event that we are obligated to file a shelf registration
statement, we will be required to keep the shelf registration statement
effective for up to two years. Other than as described above, you will not have
the right to participate in the shelf registration or require that we register
your outstanding notes under the Securities Act.
18
If you make the representations that we discuss above and participate
in the exchange offer, we believe that you may offer, sell otherwise transfer
your registered notes to another party without further registration of your
registered notes or delivering a prospectus.
We base our belief upon existing interpretations by the SEC's staff
contained in several "no-action" letters to third-parties unrelated to us. If
you tender your outstanding notes in the exchange offer for the purpose of
participating in a distribution of registered notes you cannot rely on this
interpretation by the SEC's staff and you must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. If you are not a broker-dealer that receives
registered notes for your own account in exchange for your outstanding notes,
whether the registered notes were acquired by you as a result of market-making
activities or other trading activities, you must acknowledge that you will
deliver a prospectus in connection with any resale of your registered notes.
You may suffer adverse consequences if you fail to exchange your
outstanding notes. Following the completion of the exchange offer, except as
discussed above and in the registration rights agreement we refer to, you will
not have registration rights and your outstanding notes will continue to have
some restrictions on transfer. Accordingly, if you do not participate in the
exchange offer, your ability to sell your outstanding notes could be adversely
affected. See "Risk Factors -- You may not be able to sell your outstanding
notes if you do not exchange your outstanding notes for registered notes in the
exchange offer."
TERMS OF THE EXCHANGE OFFER
We will accept any validly tendered outstanding notes which are not
withdrawn before 5:00 p.m., New York City time, on the expiration date. We will
issue $1,000 principal amount of registered notes in exchange for each $1,000
principal amount of your outstanding notes. You may tender some or all of your
outstanding notes in the exchange offer.
The form and terms of the registered notes will be the same as the form
and terms of your outstanding notes except that:
o interest on the registered notes will accrue from the last
interest payment date on which interest was paid on your
outstanding notes, or, if no interest was paid, from the date of
the original issuance of your outstanding notes; and
o the registered notes have been registered under the Securities
Act and will not bear a legend restricting their transfer.
This prospectus, together with the letter of transmittal you received
with this prospectus, is being sent to you and to others believed to have
beneficial interests in the outstanding notes. You do not have any appraisal or
dissenters' rights under the General Corporation Law of the State of Delaware or
under the indenture governing your outstanding notes. We intend to conduct the
exchange offer in compliance with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations of the SEC.
We will have accepted your validly tendered outstanding notes when we
have given oral or written notice to the exchange agent. The exchange agent will
act as agent for you for the purpose of receiving the registered notes from us.
If the exchange agent does not accept your tendered outstanding notes for
exchange because of an invalid tender or other valid reason, the exchange agent
19
will return the certificates, without expense, to you promptly as practicable
after the expiration date.
You will not be required to pay brokerage commissions, fees, or
transfer taxes in the exchange of your outstanding notes. We will pay all
charges and expenses other than any taxes you may incur in connection with the
exchange offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time, on ,
1999, unless we extend the expiration date. In any event, we will hold the
exchange offer open for at least twenty business days. In order to extend the
exchange offer, we will issue a notice by press release or other public
announcement before 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
We reserve the right, in our sole discretion:
o to delay accepting your outstanding notes;
o to extend the exchange offer;
o to terminate the exchange offer if any of the conditions shall
not have been satisfied by giving oral or written notice of any
delay, extension or termination to the exchange agent; or
o to amend the terms of the exchange offer in any manner.
PROCEDURES FOR TENDERING YOUR OUTSTANDING NOTES
Only you may tender your outstanding notes in the exchange offer.
Except as stated under "The Exchange Offer -- Book Entry Transfer," to tender in
the exchange offer, you must:
o complete, sign and date the enclosed letter of transmittal, or a
copy of it;
o have the signature on the letter of transmittal guaranteed if
required by the letter of transmittal; and
o mail, fax or otherwise deliver the letter of transmittal or copy
to the exchange agent before the expiration date.
In addition, either:
o the exchange agent must receive certificates for your
outstanding notes and the letter of transmittal before the
expiration date; or
o the exchange agent must receive a timely confirmation of a
book-entry transfer of your outstanding notes, if that procedure
is available, into the account of the exchange agent at the The
20
Depository Trust Company (the "Book-Entry Transfer Facility")
under the procedure for book-entry transfer described below
before the expiration date; or
o you must comply with the guaranteed delivery procedures
described below.
For your outstanding notes to be tendered effectively, the exchange
agent must receive a letter of transmittal and other required documents or a
valid agent's message through the The Depository Trust Company's ATOP system
before the expiration date.
If you do not withdraw your tender before the expiration date, it will
constitute an agreement between you and us in compliance with the terms and
conditions in this prospectus and in the letter of transmittal.
THE METHOD OF DELIVERY OF YOUR OUTSTANDING NOTES, A LETTER OF
TRANSMITTAL, AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR
ELECTION AND RISK. INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND THAT YOU USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT
TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. DO NOT
SEND A LETTER OF TRANSMITTAL OR OUTSTANDING NOTES DIRECTLY TO US. YOU MAY
REQUEST YOUR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
NOMINEES TO MAKE THE EXCHANGE ON YOUR BEHALF.
PROCEDURE IF THE OUTSTANDING NOTES ARE NOT REGISTERED IN YOUR NAME
If you are a beneficial owner whose outstanding notes are registered in
the name of a broker, dealer, commercial bank, trust company, or other nominee
and you want to tender, you should contact the registered holder promptly and
instruct the registered holder to tender on your behalf. If you want to tender
on your own behalf, you must, before completing and executing a letter of
transmittal and delivering your outstanding notes, either make appropriate
arrangements to register ownership of the outstanding notes in your name or
obtain a properly completed bond power or other proper endorsement from the
registered holder. We urge you to act immediately since the transfer of
registered ownership may take considerable time.
SIGNATURE REQUIREMENTS AND SIGNATURE GUARANTEES
Unless you are a registered holder who requests that your registered
notes be mailed to you and issued in your name or unless you are a member of or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program, the Stock Exchange Medallion
Program, or an "Eligible Guarantor Institution" within the meaning of Rule
17Ad-15 under the Exchange Act, each an "Eligible Institution," you must
guarantee your signature on a letter of transmittal or a notice of withdrawal by
an Eligible Guarantor Institution.
If a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation, or other person acting in a fiduciary or
representative capacity signs the letter of transmittal or any notes or bond
powers on your behalf, that person must indicate their capacity when signing,
and submit satisfactory evidence to us with the letter of transmittal
demonstrating their authority to act on your behalf.
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CONDITIONS TO THE EXCHANGE OFFER
We will decide all questions as to the validity, form, eligibility,
acceptance, and withdrawal of tendered outstanding notes, and our determination
will be final and binding on you. We reserve the absolute right to reject any
and all outstanding notes not properly tendered or accept any outstanding notes
which would be unlawful in the opinion of our counsel. We also reserve the right
to waive any defects, irregularities, or conditions of tender as to particular
outstanding notes. Our interpretation of the terms and conditions of the
exchange offer, including the instructions in a letter of transmittal, will be
final and binding on all parties. You must cure any defects or irregularities in
connection with tenders of outstanding notes as we shall determine. Although we
intend to notify you of defects or irregularities with respect to tenders of
your outstanding notes, we, the exchange agent, or any other person shall not
incur any liability for failure to give any notification. Your tender of
outstanding notes will not be deemed to have been made until any defects or
irregularities have been cured or waived. Any of your outstanding notes received
by the exchange agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned by the exchange
agent to you, unless otherwise provided in the letter of transmittal, as soon as
practicable following the expiration date.
We reserve the right to purchase or make offers for any outstanding
notes that remain outstanding after the expiration date or to terminate the
exchange offer and, to the extent permitted by law, purchase outstanding notes
in the open market, in privately negotiated transactions or otherwise. The terms
of any of these purchases or offers could differ from the terms of the exchange
offer.
These conditions are for our sole benefit and we may assert or waive
them at any time or for any reason. Our failure to exercise any of our rights
shall not be a waiver of our rights.
We will not accept for exchange any outstanding notes you tender, and
no registered notes will be issued to you in exchange for your outstanding
notes, if at that time any stop order is threatened or in effect with respect to
the registration statement or the qualification of the indenture relating to the
registered notes under the Trust Indenture Act of 1939. We are required to use
every reasonable effort to obtain the withdrawal of any stop order at the
earliest possible time.
In all cases, issuance of registered notes to you will be made only
after timely receipt by the exchange agent of certificates for your outstanding
notes or a timely Book-Entry Confirmation of your outstanding notes into the
exchange agent's account at the Book-Entry Transfer Facility, a properly
completed and duly executed letter of transmittal or, with respect to The
Depository Trust Company and its participants, electronic instructions of the
holder agreeing to be bound by the letter of transmittal, and all other required
documents. If we do not accept any of your tendered outstanding notes for a
valid reason or if you submit your outstanding notes for a greater principal
amount than you desire to exchange, we will return any unaccepted or
non-exchanged outstanding notes to you at our expense. In the case of
outstanding notes tender by book-entry transfer into the exchange agent's
account at the Book-Entry Transfer Facility under the book-entry transfer
procedures described below, your non-exchanged outstanding notes will be
credited to an account maintained with the Book-Entry Transfer Facility. This
will occur as promptly as practicable after the expiration or termination of the
exchange offer for your outstanding notes.
Notwithstanding any other provision of the exchange offer, we shall not
be required to accept for exchange, or to issue registered notes to you in
exchange for, any of your outstanding notes and may terminate or amend the
exchange offer if at any time before the acceptance of your outstanding notes
for exchange or the exchange of the registered notes for your outstanding notes,
we determine that the exchange offer violates applicable law, any applicable
22
interpretation of the staff of the SEC or any order of any governmental agency
or court of competent jurisdiction.
BOOK-ENTRY TRANSFER
The exchange agent will make requests to establish accounts at the
Book-Entry Transfer Facility for purposes of the exchange offer within two
business days after the date of this prospectus. If you are a financial
institution that is a participant in the Book-Entry Transfer Facility's systems,
you may make book-entry delivery of your outstanding notes being tendered by
causing the Book-Entry Transfer Facility to transfer your outstanding notes into
the exchange agent's account at the Book-Entry Transfer Facility in compliance
with the appropriate procedures for transfer. However, although you may deliver
your outstanding notes through book-entry transfer at the Book-Entry Transfer
Facility, you must transmit, and the exchange agent must receive, a letter of
transmittal or copy of the letter of transmittal, with any required signature
guarantees and any other required documents, except as discussed in the
following paragraph, on or before the expiration date or the guaranteed delivery
below must be complied with.
The Depository Trust Company's Automated Tender Offer Program is the
only method of processing exchange offer through The Depository Trust Company.
To accept the exchange offer through ATOP, participants in The Depository Trust
Company must send electronic instructions to The Depository Trust Company
through The Depository Trust Company's communication system instead of sending a
signed, hard copy letter of transmittal. The Depository Trust Company is
obligated to communicate those electronic instructions to the exchange agent. To
tender notes your through ATOP, the electronic instructions sent to The
Depository Trust Company and transmitted by The Depository Trust Company to the
exchange agent must contain the participant's acknowledgment of its receipt of
and agreement to be bound by the letter of transmittal for your outstanding
notes.
GUARANTEED DELIVERY PROCEDURES
If you are a registered holder of outstanding notes and desire to
tender your outstanding notes, and your outstanding notes are not immediately
available, or time will not permit your outstanding notes or other required
documents to reach the exchange agent before the expiration date, or the
procedure for book-entry transfer cannot be completed on a timely basis, you may
tender your outstanding notes if:
o the tender is made through an Eligible Institution;
o before the expiration date, the exchange agent received from an
Eligible Institution a properly completed and duly executed
letter of transmittal and Notice of Guaranteed Delivery, in the
form provided by us;
o the certificates for all physically tendered outstanding notes,
in proper form for transfer, or a Book-Entry Confirmation and
all other documents required by the applicable letter of
transmittal are received by the exchange agent within three NYSE
trading days after the date of execution of the Notice of
Guaranteed Delivery; and
o the Notice of Guaranteed Delivery shall state your name and
address and the amount of outstanding notes you are tendering,
that your tender is being made thereby and you guarantee that
within three New York Stock Exchange trading days after the date
of execution of the Notice of Guaranteed Delivery, the
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certificates for all physically tendered outstanding notes, in
proper form for transfer, or a Book-Entry Confirmation and any
other documents required by the applicable letter of transmittal
will be deposited by the Eligible Institution with the exchange
agent.
WITHDRAWAL RIGHTS
You may withdraw your tender of your outstanding notes at any time
before 5:00 p.m., New York City time, on the expiration date.
For your withdrawal to be effective, a written or, for a The Depository
Trust Company participant, electronic ATOP transmission notice of withdrawal
must be received by the exchange agent at its address found in this prospectus
before 5:00 p.m., New York City time, on the expiration date.
Your notice of withdrawal must:
o specify your name;
o identify your outstanding notes to be withdrawn, including the
certificate number or numbers and principal amount of your
outstanding notes;
o be signed by you in the same manner as the original signature on
the letter of transmittal by which your outstanding notes were
tendered or be accompanied by documents of transfer sufficient
to have the trustee of your outstanding notes register the
transfer of your outstanding notes into your name; and
o specify the name in which your outstanding notes are to be
registered, if you do not want your outstanding notes registered
in your name.
We will determine all questions as to the validity, form, and
eligibility of your notice and our determination shall be final and binding on
all you. Any outstanding notes you withdraw will not be considered to have been
validly tendered. We will return your outstanding notes which have been tendered
but not exchanged without cost to the you as soon as practicable after
withdrawal, rejection of tender, or termination of the exchange offer. You may
retender your properly withdrawn outstanding notes by following one of the above
procedures before the expiration date.
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EXCHANGE AGENT
You should direct all executed letters of transmittal to the exchange
agent. The Bank of New York is the exchange agent for the exchange offer.
Questions, requests for assistance and requests for additional copies of the
prospectus or a letter of transmittal should be directed to the exchange agent
addressed as follows:
By Registered or Certified Mail: By Hand or Overnight Delivery
The Bank of New York Before 4:30 p.m.
101 Barclay Street By Facsimile The Bank of New York
Floor 7-E (For Eligible Institutions:) 101 Barclay Street
New York, New York 10286 (212) 815-6399 Corporate Trust Services Window
Attn: Reorganization Section Attn: Reorganization Section
Gertrude Jean Pierre For Information or Gertrude Jean Pierre
(212) 815-5920 Confirmation By Telephone: (212) 815-5920
(212) 815-5920
(originals of all documents sent by facsimile should
be sent promptly by registered or certified mail, by hand
or overnight delivery service.)
FEES AND EXPENSES
We currently do not intend to make any payments to brokers, dealers, or
others to solicit acceptances of the exchange offer. The principal solicitation
is being made by mail. However, additional solicitations may be made in person
or by telephone by our officers and employees.
Our estimated cash expenses incurred in connection with the exchange
offer will be paid by us and are estimated to be $0.1 million in the aggregate.
This amount includes fees and expenses of the trustees for the registered and
outstanding notes, accounting, legal, printing, and related fees and expenses.
TRANSFER TAXES
If you tender outstanding notes for exchange you will not be obligated
to pay any transfer taxes. However, if you instruct us to register registered
notes in the name of, or request that your outstanding notes not tendered or not
accepted in the exchange offer be returned to, a person other than you will be
responsible for the payment of any transfer tax owed.
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DESCRIPTION OF THE REGISTERED NOTES
GENERAL
The notes were issued under an indenture among Protection One, Inc.,
Protection One Alarm Monitoring and The Bank of New York, as trustee, a copy of
which is filed with the SEC as an exhibit to our annual report on Form 10-K for
the year ended December 31, 1998. The following summary of some of the
provisions of the indenture and the notes does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the provisions
of the indenture, including the definitions of some terms in the indenture and
the notes and those terms made a part of the indenture by reference to the Trust
Indenture Act of 1939. Capitalized terms used herein and not otherwise defined
shall have the meanings given to them in the indenture. For definitions of some
terms used in this section, see "-- Definitions" below. As used in this
"Description of the Registered Notes," all references to
o "Protection One Alarm Monitoring" means Protection One Alarm
Monitoring, Inc., excluding, unless the context otherwise
requires or as otherwise expressly stated, its Subsidiaries and
o "Protection One, Inc." means Protection One, Inc., or its
successors, including any company the common stock of which is
exchanged for the common stock of Protection One, Inc. by way of
merger or other transaction, excluding, unless the context
otherwise requires or as otherwise expressly stated, its
Subsidiaries.
The Protection One, Inc. will guarantee the registered notes on a
senior subordinated basis.
Principal of, premium, if any, and interest on the notes may be
exchanged or transferred at the office or agency of Protection One Alarm
Monitoring in the Borough of Manhattan, The City of New York, which initially
shall be the corporate trust office of the trustee in New York, New York, except
that, at the option of Protection One Alarm Monitoring, payment of interest may
be made by check mailed to the address of each holder as the address appears in
the note register. Where payment is to be made by check, the check will be
mailed
o on the later of the Business Day on which the relevant note is
surrendered at the specified office of any of the paying agents
and the Business Day preceding the due date for payment, in the
case of principal and interest due other than on an interest
payment date, and
o on the Business Day preceding the due date for payment, in the
case of interest due on an interest payment date.
The notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples of $1000. Initially,
the trustee will act as a paying agent and the registrar for the notes. The
notes may be presented for registration of transfer and exchange at the offices
of the registrar, which initially will be the trustee's corporate trust office.
The trustee, the registrar or any paying agent or transfer agent (each an
"Agent") may resign under the provisions of the indenture and Protection One
Alarm Monitoring reserves the right at any time to vary or terminate the
appointment of any Agent and to appoint additional or other Agents. Notice of
any change in the Agents, or their specified offices, will promptly be given to
the holders of notes in compliance with the procedures in the indenture.
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PRINCIPAL, MATURITY AND INTEREST
The notes are unsecured, senior subordinated obligations of Protection
One Alarm Monitoring, limited to $350 million aggregate principal amount, and
mature on January 15, 2009 at their principal amount. Interest on the notes will
accrue at a rate of 8.125% per annum and will be payable in cash semi-annually
on each January 15 and July 15, commencing July 15, 1999. Protection One Alarm
Monitoring will make each interest payment to those persons who are holders of
record of the notes on the immediately preceding January 1 and July 1. Interest
on the notes will accrue from the most recent interest payment date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
OPTIONAL REDEMPTION
The notes may be redeemed, in whole or in part, at any time at the
option of Protection One Alarm Monitoring at the "Make-Whole Price" equal to the
greater of
o 100% of the principal amount of the notes, or
o as determined by an Independent Investment Banker, the sum of
the present values of the Remaining Scheduled Payments
discounted to the redemption date on a semiannual basis,
assuming a 360-day year consisting of twelve 30-day months, at
the Adjusted Treasury Rate,
plus, in each case, accrued and unpaid interest, including Additional Interest,
as provided for in the Registration Rights Agreement, if any, to the date of
redemption.
Unless Protection One Alarm Monitoring defaults in payment of the
redemption price, on and after the redemption date, interest will cease to
accrue on the notes or the portion of notes called for redemption.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, selection
of notes for redemption will be made by the trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
notes are listed or, in the absence of any requirements or if the notes are not
listed on a national securities exchange, on a pro rata basis, by lot or by any
other method as the trustee shall deem fair and appropriate; provided, however,
that notes of $1,000 principal amount or less shall not be redeemed in part.
Notice of redemption shall be mailed by first-class mail at least 30 but not
more than 60 days before the redemption date to each holder of notes to be
redeemed at its registered address. If any note is to be redeemed in part only,
the notice of redemption that relates to the note shall state the portion of the
principal amount to be redeemed. A new note in principal amount equal to the
unredeemed portion will be issued in the name of the holder and delivered by the
trustee to the holder by mail upon cancellation of the original note.
FALL-AWAY EVENT
Protection One, Inc.'s and its Restricted Subsidiaries' obligations to
comply with the provisions of the indenture described below under the captions
"-- Covenants -- Limitation on Incurrence of Additional Indebtedness," "--
Limitation on Restricted Payments," "Guarantees," "Limitation on Asset Sales,"
and "Change of Control" will be terminated if at any time
27
(1) the notes attain Investment Grade Status, and
(2) no Default has occurred and is continuing under the indenture (a
"Fall-Away Event"); provided, however, that these covenants shall be reinstated
as to future events if the notes cease to have Investment Grade Status from
either of the Rating Agencies, under the terms, conditions and obligations found
in the indenture, the date of reinstatement being the "Reinstatement Date". As a
result, upon the occurrence of a Fall-Away Event the notes will be entitled to
substantially no covenant protection.
CHANGE OF CONTROL
If a Change of Control Triggering Event occurs, each holder of notes
will have the right to require Protection One Alarm Monitoring to repurchase all
or any part, equal to $1,000 or an integral multiple of $1000, of the holder's
notes under the Change of Control Offer. In the Change of Control Offer,
Protection One Alarm Monitoring will offer a Change of Control Payment in cash
equal to 101% of the aggregate principal amount of the notes plus accrued and
unpaid interest on the notes, if any, to the date of purchase. Within ten days
following any Change of Control Triggering Event, Protection One Alarm
Monitoring will mail a notice to each holder describing the transaction or
transactions that constitute the Change of Control Triggering Event and offering
to repurchase notes on the date specified in the notice, which date shall be no
earlier than 30 days and no later than 60 days from the date the notice is
mailed (the "Change of Control Payment Date"), under the procedures required by
the indenture and described in the notice. Protection One Alarm Monitoring will
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent the laws and
regulations are applicable in connection with the repurchase of the notes as a
result of a Change of Control Triggering Event. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
for the Change of Control Offer, Protection One Alarm Monitoring will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations with respect to the Change of Control Offer by
virtue of its compliance with the applicable securities laws and regulations.
On the Change of Control Payment Date, Protection One Alarm Monitoring
will, to the extent lawful,
(1) accept for payment all notes or portions of notes properly
tendered under the Change of Control Offer,
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all notes or portions of notes
tendered and
(3) deliver or cause to be delivered to the trustee the notes
accepted by Protection One Alarm Monitoring together with an
Officers' Certificate stating the aggregate principal amount of
notes or portions of notes being purchased by Protection One
Alarm Monitoring.
The paying agent will promptly mail to each holder of notes tendered the Change
of Control Payment for the notes, and the trustee will promptly authenticate and
mail, or cause to be transferred by book-entry, to each holder a new note equal
in principal amount to any unpurchased portion of the notes surrendered, if any;
provided, however, that each new note will be in a principal amount of $1,000 or
an integral multiple of $1000. Protection One Alarm Monitoring will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
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The indenture provides that, before the giving of the notice referred
to below, but in any event within 30 days following the date on which the
Protection One, Inc. becomes aware that a Change of Control Triggering Event has
occurred, if the purchase of the notes would violate or constitute a default
under any other Indebtedness of the Protection One, Inc. or its Restricted
Subsidiaries, the Protection One, Inc. shall, or shall cause its Restricted
Subsidiaries, to the extent needed to permit the purchase of notes, either
(1) repay all the Indebtedness and terminate all commitments
outstanding thereunder, or
(2) obtain the requisite consents, if any, under the Indebtedness to
permit the purchase of the notes as provided below.
The Protection One, Inc. will first comply with the covenant in the preceding
sentence before it will be required to cause Protection One Alarm Monitoring to
make the Change of Control Offer or purchase the notes under the provisions
described above; provided, that the Protection One, Inc.'s failure to comply
with the covenant described in the preceding sentence shall constitute an Event
of Default described under clause (3) under "--Events of Default."
The Change of Control provisions described above will be applicable
whether or not any other provisions of the indenture are applicable. Except as
described above with respect to a Change of Control Triggering Event, the
indenture does not contain provisions that permit the holders of the notes to
require that Protection One Alarm Monitoring repurchase or redeem the notes in
the event of a takeover, recapitalization or similar transaction.
Our credit facility contains, and future Senior Indebtedness may
contain, prohibitions of some of the events that would constitute a Change of
Control Triggering Event. In addition, the exercise by the holders of notes of
their right to require Protection One Alarm Monitoring to repurchase the notes
could cause a default under the other Senior Indebtedness, even if the Change of
Control Triggering Event itself does not, due to the financial effect of found
repurchases on Protection One Alarm Monitoring. Finally, Protection One Alarm
Monitoring's ability to pay cash to the holders of notes upon a repurchase may
be limited by Protection One Alarm Monitoring's then existing financial
resources.
Protection One Alarm Monitoring will not be required to make a Change
of Control Offer upon a Change of Control Triggering Event if a third party
makes the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements found in the indenture applicable to a Change
of Control Offer made by Protection One Alarm Monitoring and purchases all notes
validly tendered and not withdrawn under the Change of Control Offer.
In addition, Protection One Alarm Monitoring shall not be required to
make an Offer to Purchase under this covenant, as provided above, if, in
contemplation of any Change of Control, it has made an offer to purchase (an
"Alternate Offer") any and all notes validly tendered at a cash price equal to
or higher than the Change of Control offer price and has purchased all notes
properly tendered in compliance the terms of the Alternate Offer.
RANKING AND SUBORDINATION
The payment of the principal of, premium, and interest, including
Additional Interest, if any, on the notes, and all other Obligations with
respect to the notes, is subordinated in right of payment, to the extent shown
in the indenture, to the payment in full in cash of all existing and future
Senior Indebtedness of Protection One Alarm Monitoring; provided, however,
29
payment from the money or the proceeds of U.S. Government Obligations held in
any defeasance trust described under "-- Satisfaction and Discharge of
Indenture; Defeasance" below is not subordinate to any Senior Indebtedness or
subject to the restrictions described herein. The notes will be senior
subordinated debt of Protection One Alarm Monitoring. After giving pro forma
effect to the Lifeline Merger, the Offering and the new credit facility, as of
December 31, 1998, Protection One Alarm Monitoring would have had between
$1,054.1 million or $969.2 million of Indebtedness outstanding assuming
shareholders of Lifeline Systems, Inc. elect the maximum cash consideration or
the maximum stock consideration, respectively. In addition, all existing and
future liabilities, including trade payables, of each Subsidiary of Protection
One Alarm Monitoring will be effectively senior to the notes except to the
extent the Subsidiary is a Guarantor. See "Risk Factors -- Subordination of
Notes." Although the indenture contains limitations on the amount of additional
Indebtedness that the Protection One, Inc. and its Restricted Subsidiaries may
incur, under some circumstances the amount of the additional Indebtedness could
be substantial and, in any case, all or a portion of the Indebtedness may be
Senior Indebtedness and may be secured. See "-- Covenants -- Limitation on
Incurrence of Additional Indebtedness."
Only Indebtedness of Protection One Alarm Monitoring that is Senior
Indebtedness will rank senior to the notes in compliance with the provisions of
the indenture. The notes will in all respects rank pari passu with all other
Senior Subordinated Indebtedness of Protection One Alarm Monitoring. Protection
One Alarm Monitoring has agreed in the indenture that it will not incur,
directly or indirectly, any Indebtedness that is subordinate in right of payment
to Senior Indebtedness unless the Indebtedness is Senior Subordinated
Indebtedness or is contractually subordinated in right of payment to Senior
Subordinated Indebtedness. Unsecured Indebtedness is not deemed to be
subordinate or junior to Secured Indebtedness merely because it is unsecured,
nor is any Indebtedness deemed to be subordinate or junior to other Indebtedness
merely because it matures after the other Indebtedness. Secured Indebtedness is
not deemed to be Senior Indebtedness merely because it is secured.
Protection One Alarm Monitoring may not pay principal of, premium or
interest, including Additional Interest, if any, or other Obligations with
respect to, the notes or make any deposit under the provisions described under
"-- Satisfaction and Discharge of Indenture; Defeasance" below and may not
otherwise redeem, purchase or retire any notes (collectively, "pay the notes")
if
(1) any Senior Indebtedness is not paid when due, or
(2) any other default on Senior Indebtedness occurs and the
maturity of the Senior Indebtedness is accelerated in
compliance with its terms unless, in either case, the default
has been cured or waived and/or any the acceleration has been
rescinded or the Senior Indebtedness has been paid;
provided, however, that Protection One Alarm Monitoring may pay the notes
without regard to the foregoing if Protection One Alarm Monitoring and the
trustee receive written notice approving the payment from the Representative of
the Senior Indebtedness with respect to which either of the events shown in
clause (1) or (2) of the immediately preceding sentence has occurred and is
continuing. During the continuance of any default, other than a default
described in clause (1) or (2) of the preceding sentence, with respect to any
Designated Senior Indebtedness under which the maturity of any Senior
Indebtedness may be accelerated immediately without further notice, except the
notice that may be required to effect the acceleration, or the expiration of any
applicable grace periods, Protection One Alarm Monitoring may not pay the notes,
for a period (a "Payment Blockage Period") commencing upon the receipt by the
30
trustee with a copy to Protection One Alarm Monitoring of written notice (a
"Blockage Notice") of the default from the Representative of the holders of the
Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter, or earlier if the Payment
Blockage Period is terminated
(1) by written notice to the trustee and Monitoring from the Person
or Persons who gave the Blockage Notice,
(2) because the default giving rise to the Blockage Notice has been
cured or waived or is no longer continuing, or
(3) because the Designated Senior Indebtedness has been repaid in
full.
During this period, holders of the notes may, however, receive
(1) Qualified Capital Stock issued by Protection One, Inc. or any of
its Restricted Subsidiaries to pay interest on the notes or
issued in exchange for the notes,
(2) securities substantially identical to the notes issued by
Protection One Alarm Monitoring in payment of interest accrued
on the notes, or
(3) securities issued by Protection One Alarm Monitoring which are
subordinated to Senior Indebtedness at least to the same extent
as the notes and having a Weighted Average Life to Maturity at
least equal to the remaining Weighted Average Life to Maturity
of the notes.
Notwithstanding the foregoing provisions, but subject to the provisions of the
first sentence of this paragraph and the provisions of the immediately
succeeding paragraph, Protection One Alarm Monitoring may resume payments on the
notes after the end of the Payment Blockage Period. Not more than one Blockage
Notice may be given, and not more than one Payment Blockage Period may occur, in
any consecutive 360-day period, irrespective of the number of defaults with
respect to Designated Senior Indebtedness during this period. However, if any
Blockage Notice within the 360-day period is given by or on behalf of any
holders of Designated Senior Indebtedness, other than the agent under the credit
facility, the agent under our credit facility may give another Blockage Notice
within the period. In no event, however, may the total number of days during
which any Payment Blockage Period or Payment Blockage Periods is in effect
exceed 179 days in the aggregate during any 360-consecutive-day period. No
nonpayment default that existed or was continuing on the date of delivery of any
Blockage Notice to the trustee shall be, or be made, the basis for a subsequent
Blockage Notice unless the default shall have been cured or waived for a period
of not less than 90 consecutive days. The failure of Protection One Alarm
Monitoring to pay principal for more than five days after the date due, or to
pay interest, including Additional Interest, if any, on the notes for more than
30 days after the scheduled payment date therefor, as a result of the occurrence
of a Payment Blockage Period shall nevertheless constitute an Event of Default
under the indenture.
Upon any payment or distribution of the assets of Protection One Alarm
Monitoring upon a total or partial liquidation or dissolution or bankruptcy or
reorganization or similar proceeding relating to Protection One Alarm Monitoring
or its property, an assignment for the benefit of creditors or any marshalling
of Protection One Alarm Monitoring's assets and liabilities, the holders of
Senior Indebtedness will be entitled to receive payment in full in cash of the
Senior Indebtedness before the holders of the notes are entitled to receive any
payment or distribution, and until the Senior Indebtedness is paid in full in
cash, any payment or distribution to which holders of the notes would be
31
entitled but for the subordination provisions of the indenture will be made to
holders of the Senior Indebtedness as their interests may appear, except that
holders of the notes may receive:
(1) Qualified Capital Stock issued by Protection One, Inc. or any of
its Restricted Subsidiaries to pay interest on the notes or
issued in exchange for the notes,
(2) securities substantially identical to the notes issued by
Protection One Alarm Monitoring in payment of interest accrued
on the notes, or
(3) securities issued by Protection One Alarm Monitoring which are
subordinated to Senior Indebtedness at least to the same extent
as the notes and having a Weighted Average Life to Maturity at
least equal to the remaining Weighted Average Life to Maturity
of the notes.
If a distribution is made to the trustee or to holders of the notes
that, due to the subordination provisions of the indenture, should not have been
made to them, the trustee or the holders are required to hold it in trust for
the holders of Senior Indebtedness and pay it over to them as their interests
may appear.
If payment of the notes is accelerated because of an Event of Default,
Protection One Alarm Monitoring or the trustee shall promptly notify the
Representative, if any, of any issue of Designated Senior Indebtedness which is
then outstanding; provided, however, that Protection One Alarm Monitoring and
the trustee shall be obligated to notify the Representative, other than with
respect to our credit facility, only if the Representative has delivered or
caused to be delivered an address for the service of a notice to Protection One
Alarm Monitoring and the trustee, and Protection One Alarm Monitoring and the
trustee shall be obligated only to deliver the notice to the address so
specified. If a notice is required under the immediately preceding sentence,
Protection One Alarm Monitoring may not pay the notes, except payment
(1) in Qualified Capital Stock issued by Protection One, Inc. or any
of its Restricted Subsidiaries to pay interest on the notes or
issued in exchange for the notes,
(2) in securities substantially identical to the notes issued by
Protection One Alarm Monitoring in payment of interest accrued
thereon, or
(3) in securities issued by Protection One Alarm Monitoring which
are subordinated to the Senior Indebtedness at least to the same
extent as the notes and have a Weighted Average Life to Maturity
at least equal to the remaining Weighted Average Life to
Maturity of the notes,
until five Business Days after the respective Representative of the Designated
Senior Indebtedness receives notice at the address specified in the preceding
sentence of the acceleration and, thereafter, may pay the notes only if the
subordination provisions of the indenture otherwise permit payment at that time.
By reason of the subordination provisions contained in the indenture,
in the event of liquidation or insolvency, creditors of Protection One Alarm
Monitoring who are holders of Senior Indebtedness may recover more, ratably,
than the holders of the notes, and creditors of Protection One Alarm Monitoring
who are not holders of Senior Indebtedness, including holders of the notes, may
recover less, ratably, than holders of Senior Indebtedness. In addition, subject
to the "Merger, Consolidation and Sale of Assets" covenant, the indenture does
32
not prohibit the sale, transfer or other disposition of assets of Protection One
Alarm Monitoring to its Restricted Subsidiaries. In the event of a sale,
transfer or disposition, holders of the notes will be effectively subordinated
to the claims of creditors of the Restricted Subsidiaries with respect to those
assets.
Similar subordination provisions will apply to the note Guarantees by
the Protection One, Inc. or any Subsidiary Guarantor. See "-- Covenants --
Guarantees."
FRAUDULENT CONVEYANCE
A court could void Protection One Alarm Monitoring's obligations under
a holder's registered notes, subordinate a holder's registered notes to
Protection One Alarm Monitoring's other debt, or order a holder to return any
amounts paid to the holder under the registered notes to Protection One Alarm
Monitoring or to a fund benefitting Protection One Alarm Monitoring's creditors
if the court finds that, at the time Protection One Alarm Monitoring sold the
registered notes, it intended to defraud its creditors or did not receive fair
value for the registered notes and Protection One Alarm Monitoring:
o was "insolvent", which means it could not pay its debts when
they came due or the sum of Protection One Alarm Monitoring's
debts was greater than the fair value of all of its assets, or
Protection One Alarm Monitoring became insolvent as a result of
its obligations under the registered notes;
o did not have enough capital to operate its business following
the sale of the registered notes; or
o intended to or believed that it overextended its debt
obligations.
The standards for insolvency vary. Protection One Alarm Monitoring
cannot predict which standard a court would apply or if a court would determine
that it was insolvent at the time of sale of the registered notes or became
insolvent as a result of the sale.
REGISTRATION RIGHTS
Protection One Alarm Monitoring and the Guarantors have agreed with the
Placement Agents, for the benefit of the holders, that Protection One Alarm
Monitoring and the Guarantors will use their reasonable best efforts, at their
cost, to file and cause to become effective a registration statement with
respect to a registered offer (the "Exchange Offer") to exchange the registered
notes for an issue of senior subordinated notes of Protection One Alarm
Monitoring guaranteed by the Guarantors with terms identical to the outstanding
notes, except that the registered notes will not bear legends restricting their
transfer or providing for Additional Interest.
In the event that applicable interpretations of the staff of the
Commission do not permit Protection One Alarm Monitoring and the Guarantors to
effect the Exchange Offer, or under some other circumstances, Protection One
Alarm Monitoring and the Guarantors shall, at their cost, use their reasonable
best efforts to cause to become effective a shelf registration statement (the
"Shelf Registration Statement") with respect to resales of the notes and to keep
the Shelf Registration Statement effective until the expiration of the time
period referred to in Rule 144(k) under the Securities Act, or a shorter period
that will terminate when all notes covered by the Shelf Registration Statement
have been sold under the Shelf Registration Statement. Protection One Alarm
Monitoring and the Guarantors shall, in the event of a shelf registration,
provide to each holder copies of the prospectus, notify each holder when the
33
Shelf Registration Statement for the notes has become effective and take some
other actions as are required to permit resales of the notes. A holder that
sells its notes under the Shelf Registration Statement generally will be
required to be named as a selling security holder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to some of the civil
liability provisions under the Securities Act in connection with sales of the
Registered Notes and will be bound by the provisions of the Registration Rights
Agreement that are applicable to a holder including some of the indemnification
obligations.
In the event that the Exchange Offer is not consummated and a Shelf
Registration Statement is not declared effective on or before the date that is
six months after the Issue Date, the annual interest rate borne by the notes
will be increased by 0.50% per annum ("Additional Interest") until the Exchange
Offer is consummated or the Shelf Registration Statement is declared effective.
If Protection One Alarm Monitoring and the Guarantors effect the
Exchange Offer, they will be entitled to close the Exchange Offer 20 business
days after the commencement of the Exchange Offer, provided that they have
accepted all notes theretofore validly surrendered and not withdrawn in
compliance with the terms of the Exchange Offer. Notes not tendered in the
Exchange Offer shall bear interest at the rate shown on the cover page of this
prospectus and will be subject to all of the terms and conditions specified in
the indenture and to the transfer restrictions described in "Transfer
Restrictions."
This summary of some provisions of the Registration Rights Agreement
does not purport to be complete and is subject to and qualified in its entirety
by reference to, all the provisions of the Registration Rights Agreement, a copy
of which is available from Protection One Alarm Monitoring upon request.
COVENANTS
The indenture will provide that all of the following restrictive
covenants will be applicable to the Protection One, Inc. and its Restricted
Subsidiaries unless and until a Fall-Away Event occurs. In this event, the
Protection One, Inc. and its Restricted Subsidiaries will be released from their
obligations to comply with the restrictive covenants described below, other than
"Limitation on Senior Subordinated Debt" and "Merger, Consolidation and Sale of
Assets", as well as the related events of default under the notes and the
indenture, unless these covenants are reinstated as described in "-- Fall-Away
Events" above.
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LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS
The indenture will provide that Protection One, Inc. will not, and will
not permit its Restricted Subsidiaries to, directly or indirectly, create,
incur, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (other than Permitted Indebtedness); provided, however, that
Protection One, Inc. and its Restricted Subsidiaries may incur Indebtedness if
the Interest Coverage Ratio at the time of incurrence of the Indebtedness, after
giving pro forma effect to the incurrence as of the date and to the use of
proceeds from the issuance, is greater than or equal to 2.25:1.
Notwithstanding any other provision of this "Limitation on Incurrence
of Additional Indebtedness" covenant, the maximum amount of Indebtedness that
Protection One, Inc. or a Restricted Subsidiary may Incur under this "Limitation
on Incurrence of Additional Indebtedness" covenant shall not be deemed to be
exceeded, with respect to any outstanding Indebtedness, due solely to the result
of fluctuations in the exchange rates of currencies.
For purposes of determining compliance with this covenant, if an item
of Permitted Indebtedness meets the criteria of more than one of the categories
of Permitted Indebtedness or is entitled to be incurred under the first
paragraph of this covenant, Protection One Alarm Monitoring shall, in its sole
discretion, classify and, from time to time may reclassify, the item of
Indebtedness and the item of Indebtedness will be treated as having been
incurred under only one of the clauses of the definition of Permitted
Indebtedness or under the first paragraph hereof except as otherwise shown in
clause (5) of the definition of Permitted Indebtedness. Accrual of interest, the
accretion of accreted value and the payment of interest in the form of
additional Indebtedness will not be deemed to be an incurrence of Indebtedness
for purposes of this covenant.
LIMITATION ON SENIOR SUBORDINATED DEBT
Neither Protection One, Inc., Protection One Alarm Monitoring nor any
Restricted Subsidiary that is a Guarantor shall Incur any Indebtedness that is
subordinate in right of payment to any Senior Indebtedness, or Guarantor Senior
Indebtedness, as applicable, unless the Indebtedness is pari passu with, or
subordinated in right of payment to, the notes or the notes Guarantees, as
applicable, to at least the same extent as the notes are subordinated to Senior
Indebtedness, or the notes Guarantees are subordinated to Guarantor Senior
Indebtedness, as applicable; provided, however, that the foregoing limitation
shall not apply to distinctions between categories of Senior Indebtedness or
Guarantor Senior Indebtedness that exists by reason of any Liens or Guarantees
arising or created in respect of some but not all the Senior Indebtedness or
Guarantor Senior Indebtedness.
LIMITATION ON RESTRICTED PAYMENTS
The indenture will provide that Protection One, Inc. will not, and will
not cause or permit its Restricted Subsidiaries, to, directly or indirectly,
make any Restricted Payment if at the time of the Restricted Payment and
immediately after giving effect to the Restricted Payment:
(1) a Default or Event of Default shall have occurred and be
continuing; or
(2) Protection One, Inc. is not able to incur $1.00 of additional
Indebtedness under the first paragraph of the "Limitation on
Incurrence of Additional Indebtedness" covenant; or
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(3) the aggregate amount of Restricted Payments made after the Issue
Date, the amount expended for those purposes, if other than in
cash, being the fair market value of the property as determined
by the board of directors of Protection One, Inc. in good faith,
exceeds the sum of
(a) (x) 100% of Consolidated EBITDA accrued after the Issue
Date to the most recent date for which financial
information has been filed with the SEC or provided to
the trustee (taken as one accounting period), less (y)
1.75 times Consolidated Interest Expense for the same
period, plus
(b) 100% of the aggregate net proceeds, including the fair
market value of property other than cash as determined
by the board of directors of Protection One, Inc. in
good faith, received after the Issue Date by Protection
One, Inc. or any Restricted Subsidiary from any Person,
other than a Restricted Subsidiary of Protection One,
Inc., from the issuance and sale after the Issue Date of
Qualified Capital Stock of Protection One, Inc. or any
Restricted Subsidiary, excluding any net proceeds from
issuances and sales financed directly or indirectly
using funds borrowed from Protection One, Inc. or any
Restricted Subsidiary, until and to the extent the
borrowing is repaid, but including the proceeds from the
issuance and sale, whether before or after the Issue
Date, of any securities convertible into or exchangeable
for Qualified Capital Stock of Protection One, Inc. or
any Restricted Subsidiary to the extent those securities
are so converted or exchanged after the Issue Date and
including any additional proceeds received by Protection
One, Inc. or the Restricted Subsidiary upon the
conversion or exchange, plus
(c) without duplication of any amount included in clause
(3)(b) above, 100% of the aggregate net proceeds,
including the fair market value of property other than
cash (valued as provided in clause (3)(b) above),
received by Protection One, Inc. as a capital
contribution after the Issue Date, plus
(d) $25 million, plus
(e) an amount equal to the net reduction in Investments in
any Unrestricted Subsidiary or in an Affiliate of
Protection One, Inc. that is not controlled, directly or
indirectly, by Protection One, Inc. resulting from
payments of interest on debt, dividends, repayments of
loans or advances, or other transfers of assets, in each
case to Protection One, Inc. or any Restricted
Subsidiary or from the net proceeds (if other than cash,
valued as provided in clause (3)(b) above) from the sale
of any Investment (except, in each case, to the extent
that any payment or proceeds are included in the
calculation of Consolidated EBITDA), or from
redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided
in the definition of "Investments") not to exceed, in
each case, the amount of Investments previously made by
Protection One, Inc. or any Restricted Subsidiary in the
Person. Notwithstanding the foregoing, these provisions
will not prohibit:
(1) the payment of any dividend or the making of any distribution
within 60 days after the date of its declaration if the dividend
or distribution would have been permitted on the date of
declaration;
(2) the purchase, redemption or other acquisition or retirement of
any Capital Stock of Protection One, Inc. or any Restricted
Subsidiary or any warrants, options or other rights to acquire
shares of any class of the Capital Stock either
(a) solely in exchange for shares of Qualified Capital Stock of
Protection One, Inc. or any Restricted Subsidiary or other
warrants, options or rights to acquire Qualified Capital Stock
of Protection One, Inc. or any Restricted Subsidiary or
(b) through the application of the net proceeds of a substantially
concurrent sale for cash, other than to a Restricted Subsidiary,
of shares of Qualified Capital Stock of Protection One, Inc. or
any Restricted Subsidiary or warrants, options or other rights
to acquire Qualified Capital Stock of Protection One, Inc. or
any Restricted Subsidiary or
36
(c) in the case of Disqualified Capital Stock, solely in
exchange for, or through the application of the net
proceeds of a substantially concurrent sale for cash,
other than to a Restricted Subsidiary, of, Disqualified
Capital Stock;
(3) the making of any principal payment or the redemption,
repurchase, defeasance or other acquisition or retirement for
value of Indebtedness of Protection One, Inc., Protection One
Alarm Monitoring or any Subsidiary Guarantor which is
subordinated in right of payment to the note Guarantee or the
notes, as the case may be, in exchange for, or out of the
proceeds of, a substantially concurrent sale for cash, other
than to a Restricted Subsidiary, of,
(a) shares of Qualified Capital Stock of Protection One,
Inc. or any Restricted Subsidiary, or options, warrants
or other rights to acquire the Capital Stock or
(b) Refinancing Indebtedness;
(4) payments or distributions to dissenting stockholders under
applicable law, pursuant to or in connection with a
consolidation, merger or transfer of assets;
(5) repurchases of warrants, options or rights to acquire Capital
Stock deemed to occur upon exercise of warrants, options or
rights to acquire Capital Stock if those warrants, options or
rights represent a portion of the exercise price of the
warrants, options or rights;
(6) dividends on Qualified Capital Stock in an annual amount not to
exceed 6.0% of the net cash proceeds received from shares of
Qualified Capital Stock sold, other than to a Restricted
Subsidiary, for the account of Protection One, Inc. or a
Restricted Subsidiary; and
(7) Investments, not to exceed more than $25 million at any time
outstanding, in Unrestricted Subsidiaries or Affiliates of
Protection One, Inc. not controlled, directly or indirectly, by
Protection One, Inc..
In the case of clauses other than clauses (1), (2) and (7), however, no Event of
Default shall have occurred or be continuing at the time of the payment or as a
result of that payment. In determining the aggregate amount of Restricted
Payments made after the Issue Date, amounts expended under clauses (1), (2)(a),
(2)(b), (3)(a), (4) and (6) shall be included in the calculation.
To the extent the issuance of Capital Stock and the receipt of capital
contributions are applied to permit the issuance of Indebtedness under clause
(5) of the definition of Permitted Indebtedness, the issuance of the Capital
Stock and the receipt of the capital contributions shall not be applied to
permit payments under this covenant.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The indenture will provide that neither Protection One Alarm Monitoring
nor Protection One, Inc. shall consolidate with or merge into any other Person
or sell, convey, transfer or lease its properties and assets substantially as an
entirety to any Person, unless:
(1) the Person formed by the consolidation or into which
Protection One Alarm Monitoring or Protection One, Inc., as
applicable, is merged or the Person which acquires by sale,
conveyance or transfer, or which leases, the properties and
assets of Protection One Alarm Monitoring or Protection One,
Inc., substantially as an entirety
37
(a) shall be a corporation, partnership, limited
liability company or trust organized and validly
existing under the laws of the United States of
America, any state of the United States of America or
the District of Columbia and
(b) shall expressly assume, by an indenture supplemental
thereto, executed and delivered to the trustee, in
form reasonably satisfactory to the trustee, the
obligations of Protection One Alarm Monitoring and/or
Protection One, Inc., as applicable, for the due and
punctual payment of the principal of, premium and
interest, including Additional Interest, if any, on
all the notes and the performance and observance of
every covenant of the indenture on the part of
Protection One Alarm Monitoring or on the part of
Protection One, Inc. to be performed or observed;
(2) immediately after giving effect to the transaction, no Default
or Event of Default shall have occurred and be continuing; and
(3) Protection One Alarm Monitoring or Protection One, Inc., as
applicable, or the Person shall have delivered to the trustee
an Officers' Certificate and an Opinion of Counsel, each
stating that the consolidation, merger, conveyance, transfer
or lease and the supplemental indenture comply with the
"Merger, Consolidation and Sale of Assets" provisions of the
indenture and that all conditions precedent provided for
relating to the transaction have been satisfied.
These provisions apply only to a merger or consolidation in which Protection One
Alarm Monitoring or a Guarantor, as applicable, is not the surviving corporation
and to sales, conveyance, leases and transfers by Protection One Alarm
Monitoring and Protection One, Inc. as transferor or lessor.
The indenture further provides that upon consolidation by Protection
One Alarm Monitoring or Protection One, Inc., as applicable, with any other
Person or merger by Protection One Alarm Monitoring or Protection One, Inc., as
applicable, into any other Person or any sale, conveyance, transfer or lease of
the properties and assets of Protection One Alarm Monitoring or Protection One,
Inc., as applicable, substantially as an entirety to any Person in compliance
with the preceding paragraph, the successor Person formed by the consolidation
or into which Protection One Alarm Monitoring or Protection One, Inc., as
applicable, is merged or to which the conveyance, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every right and power
of, Protection One Alarm Monitoring and Protection One, Inc. under the indenture
and Protection One, Inc. under its Guarantee, as applicable, with the same
effect as if the successor Person had been named as Protection One Alarm
Monitoring or Protection One, Inc. therein, respectively, and in the event of a
conveyance or transfer, Protection One Alarm Monitoring and Protection One,
Inc., as applicable, except in the case of a lease, shall be discharged of all
obligations and covenants under the indenture, the notes and the Guarantee of
the Protection One, Inc..
LIMITATION ON ASSET SALES
Protection One, Inc. will not, and will not permit any Restricted
Subsidiary to, consummate any Asset Sale, unless
(1) the consideration received by Protection One, Inc. or the
Restricted Subsidiary is at least equal to the fair market
value of the assets sold or disposed of as determined by the
board of directors of Protection One, Inc. or the Restricted
Subsidiary, as the case may be, and
(2) at least 75% of the consideration received consists of cash or
Temporary Cash Investments or the assumption of Indebtedness
of Protection One, Inc. or any Restricted Subsidiary, other
than Indebtedness to Protection One Alarm Monitoring or any
Restricted Subsidiary;
38
provided, however, that Protection One, Inc. or the Restricted Subsidiary is
irrevocably and unconditionally released from all liability under the
indebtedness, or notes or other obligations that are promptly, but in no event
more than 90 days after receipt, converted by Protection One, Inc. or the
Restricted Subsidiary into cash or Temporary Cash Investments.
In the event and to the extent that the Net Cash Proceeds received by
Protection One, Inc. or any of its Restricted Subsidiaries from one or more
Asset Sales occurring after the Closing Date in any period of 12 consecutive
months exceed 10% of Adjusted Consolidated Net Tangible Assets, determined as of
the date closest to the commencement of the 12-month period for which a
consolidated balance sheet of Protection One, Inc. has been filed with the SEC
or provided to the trustee, then the Protection One, Inc. shall or shall cause
the relevant Restricted Subsidiary to:
(1) within twelve months after the date Net Cash Proceeds so
received exceed 10% of Adjusted Consolidated Net Tangible Assets
(a) apply an amount equal to the amount of the Net Cash
Proceeds in excess of 10% of Adjusted Consolidated Net
Tangible Assets to permanently repay Senior Indebtedness
or Guarantor Senior Indebtedness or any Indebtedness of
any Restricted Subsidiary, other than a Subsidiary
Guarantor, in each owing to a Person other than
Protection One, Inc. or any of its Restricted
Subsidiaries; or
(b) invest, including by way of capital expenditure or
acquisition of Capital Stock or assets, an equal amount,
or the amount not so applied under clause (A) (or enter
into a definitive agreement committing to so invest
within twelve months after the date of the agreement),
in property or assets (other than current assets) of a
nature or type or that are used in a business (or in a
Person having property and assets of a nature or type,
or engaged in a business) related, ancillary, or
complementary to the business of Protection One, Inc.
and its Restricted Subsidiaries existing on the date of
the investment; and
(2) apply, no later than the end of later of (x) the 12-month
period referred to in clause (1) or (y) the additional period
referred to in paragraph (b) of clause (1), the Net Cash
Proceeds, to the extent not applied under clause (1), as
provided in the following paragraph of this "Limitation on
Asset Sales" covenant.
The amount of the Net Cash Proceeds required to be applied, or to be committed
to be applied, during the period shown in clause (1) of the preceding sentence
and not applied as so required by the end of the period shall constitute "Excess
Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not previously subject to an Offer to Purchase under this
"Limitation on Asset Sales" covenant totals at least $10 million, Protection One
Alarm Monitoring must commence, not later than the fifteenth Business Day of
that month, and consummate an Offer to Purchase from the holders and if required
by the terms of any Indebtedness that is pari passu with the notes ("Pari Passu
Indebtedness"), from the holders of the Pari Passu Indebtedness on a pro rata
basis an aggregate principal amount of notes and Pari Passu Indebtedness equal
to the Excess Proceeds on that date, at a purchase price equal to 100% of the
principal amount of notes and Pari Passu Indebtedness, plus, in each case,
accrued and unpaid interest, if any, to the payment date. If the aggregate
principal amount of notes and any Pari Passu Indebtedness validly tendered by
holders of notes and Pari Passu Indebtedness exceeds the amount of Excess
Proceeds, the notes and Pari Passu Indebtedness shall be purchased on a pro rata
basis. Upon the completion of this Offer to Purchase, the amount of Excess
Proceeds shall be reset at zero.
39
GUARANTEES
Protection One Alarm Monitoring's obligations under the notes are fully
and unconditionally guaranteed on a senior subordinated basis by Protection One,
Inc. and, subject to some limitations, by the domestic Restricted Subsidiaries
of Protection One, Inc., so long as they remain Restricted Subsidiaries of
Protection One, Inc., (each, a "Subsidiary Guarantor"). Accordingly, each note
Guarantee is subordinated to the Guarantor Senior Indebtedness of the issuer of
the note Guarantee on the same basis as provided above with respect to the
subordination of Senior Subordinated Indebtedness of Protection One Alarm
Monitoring to Senior Indebtedness of Protection One Alarm Monitoring. Neither
Protection One, Inc. nor any Subsidiary Guarantor has any material Guarantor
Senior Indebtedness, other than in respect of our credit facility.
In addition to the Subsidiary Guarantors named in the indenture on the
Closing Date, the indenture will provide that any new domestic Restricted
Subsidiary of Protection One, Inc. shall become a Guarantor if and for so long
as that Restricted Subsidiary provides a Guarantee in respect of Senior
Indebtedness of Protection One Alarm Monitoring.
The indenture will provide that if all or substantially all of the
assets of any Subsidiary Guarantor or all of the Capital Stock of any Subsidiary
Guarantor is sold, including by issuance or otherwise, by Protection One, Inc.
or any of its Restricted Subsidiaries in a transaction constituting an Asset
Sale that does not otherwise violate the indenture, then the Subsidiary
Guarantor, in the event of a sale or other disposition of all of the Capital
Stock of the Subsidiary Guarantor, or the Person acquiring the assets, in the
event of a sale or other disposition of all or substantially all of the assets
of the Subsidiary Guarantor, shall be released and discharged of its obligations
under the note Guarantee.
REPORTS
The indenture will provide that so long as any of the notes are
outstanding, Protection One Alarm Monitoring or Protection One, Inc. will
provide to the trustee and the holders of notes and file with the SEC, to the
extent the submissions are accepted for filing by the SEC, copies of the annual
reports and of the information, documents and other reports that Protection One
Alarm Monitoring and Protection One, Inc. would have been required to file with
the SEC under Sections 13 or 15(d) of the Exchange Act, regardless of whether
either of them is then obligated to file the reports.
EVENTS OF DEFAULT
The following events will be defined in the indenture as "Events of
Default":
(1) the failure to pay interest on the notes when interest becomes
due and payable and the Default continues for a period of 30
days, whether or not the payment is prohibited by the
provisions described under "-- Ranking and Subordination"
above;
(2) the failure to pay principal of or premium, if any, on any
notes when the principal or premium, if any, becomes due and
payable, at maturity, upon redemption or otherwise, whether or
not the payment is prohibited by the provisions described
under "-- Ranking and Subordination" above, and the Default
continues for five or more days;
(3) a default in the observance or performance of any other
covenant or agreement contained in the notes or the indenture,
which default continues for a period of 60 days after
Protection One Alarm Monitoring receives written notice of
40
default specifying the default from the trustee or holders of
at least 25% in aggregate principal amount of outstanding
notes;
(4) there occurs with respect to any issue or issues of
Indebtedness of Protection One, Inc. or any Significant
Restricted Subsidiary having an outstanding principal amount
of $20 million or more in the aggregate for all the issues of
all these Persons, whether the Indebtedness now exists or
shall hereafter be created,
(a) an event of default that has caused the holder of the
Indebtedness to declare the Indebtedness to be due
and payable before its Stated Maturity and the
Indebtedness has not been discharged in full or the
acceleration has not been rescinded or annulled
within 60 days of the acceleration, and/or
(b) the failure to make a principal payment at the final
but not any interim fixed maturity and the defaulted
payment shall not have been made, waived or extended
within 60 days of the payment default;
(5) any of the note Guarantees ceases to be in full force and
effect or any of the note Guarantees is declared to be null
and void and unenforceable or any of the note Guarantees is
found to be invalid or any of the Guarantors denies its
liability under its note Guarantee other than by reason of
release of a Guarantor in compliance with the terms of the
indenture;
(6) one or more judgments in an aggregate amount in excess of $20
million, which are not covered by insurance as to which the
insurer has not disclaimed coverage, being rendered against
Protection One, Inc. or any of its Significant Restricted
Subsidiaries and the judgment or judgments remain undischarged
or unstayed for a period of 60 days after the judgment or
judgments become final and nonappealable; and
(7) some events of bankruptcy, insolvency or reorganization
affecting Protection One, Inc. or any of its Significant
Restricted Subsidiaries.
Upon the happening of any Event of Default specified in the indenture,
other than those of the type described in clause (7) of the preceding paragraph
relating to Protection One, Inc. or Protection One Alarm Monitoring, the trustee
may, and the trustee upon the request of holders of 25% in principal amount of
the outstanding notes shall, or the holders of at least 25% in principal amount
of outstanding notes may, declare the principal of all the notes, together with
all accrued and unpaid interest and premium, if any, to be due and payable by
notice in writing to the Company and the trustee specifying the respective Event
of Default and that it is a "Acceleration Notice." The Acceleration Notice
(1) shall become immediately due and payable or
(2) if there are any amounts outstanding under our credit
facility, will become due and payable upon the first to occur
of an acceleration under our credit facility or five Business
Days after receipt by Protection One Alarm Monitoring and the
agent under our credit facility of the Acceleration Notice
41
unless all Events of Default specified in the Acceleration
Notice have been cured or waived.
If an Event of Default with respect to bankruptcy proceedings relating
to Protection One, Inc. or Protection One Alarm Monitoring occurs and is
continuing, then the amount will ipso facto become and be immediately due and
payable without any declaration or other act on the part of the trustee or any
holder of the notes.
At any time after a declaration of acceleration with respect to the
notes as described in the preceding paragraph, the holders of a majority in
principal amount of the notes then outstanding, by notice to the trustee, may
rescind and cancel the declaration and its consequences if
(1) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction,
(2) all existing Defaults and Events of Default have been cured or
waived except nonpayment of principal of or interest on the
notes that has become due solely by the declaration of
acceleration,
(3) to the extent the payment of the interest is lawful, interest
(at the same rate specified in the notes) on overdue
installments of interest and overdue payments of principal
which has become due otherwise than by the declaration of
acceleration has been paid,
(4) Protection One Alarm Monitoring has paid the trustee its
reasonable compensation and reimbursed the trustee for its
reasonable expenses, disbursements and advances and
(5) in the event of the cure or waiver of a Default or Event of
Default of the type described in clause (7) of the first
paragraph of "-- Events of Default" above, the trustee has
received an Officers' Certificate and Opinion of Counsel that
the Default or Event of Default has been cured or waived.
The holders of a majority in principal amount of the notes may waive
any existing Default or Event of Default under the indenture, and its
consequences, except a default in the payment of the principal of or interest on
any notes. In the event of any Event of Default specified in clause (4) of the
first paragraph of "--Events of Default," the Event of Default and all
consequences of an Event of Default, including without limitation any
acceleration or resulting payment default, shall be annulled, waived and
rescinded, automatically and without any action by the trustee or the holders of
the notes, if within 60 days after the Event of Default arose:
(1) the Indebtedness that is the basis for the Event of Default
has been discharged, or
(2) the holders of the Indebtedness have rescinded or waived the
acceleration, notice or action, as the case may be, giving
rise to the Event of Default, or
(3) if the default that is the basis for the Event of Default has
been cured.
Protection One Alarm Monitoring is required to deliver to the trustee,
within 120 days after the end of its fiscal year, a certificate indicating
whether the signing officers know of any Default or Event of Default that
occurred during the previous year and whether Protection One Alarm Monitoring
has complied with its obligations under the indenture. In addition, Protection
One Alarm Monitoring will be required to notify the trustee of the occurrence
42
and continuation of any Default or Event of Default promptly after Protection
One Alarm Monitoring becomes aware of the same.
Subject to the provisions of the indenture relating to the duties of
the trustee in case an Event of Default thereunder should occur and be
continuing, the trustee will be under no obligation to exercise any of the
rights or powers under the indenture at the request or direction of any of the
holders of the notes unless the holders have offered to the trustee reasonable
indemnity or security against any loss, liability or expense. Subject to the
provision for security or indemnification and some limitations contained in the
indenture, the holders of a majority in principal amount of the outstanding
notes have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
Protection One, Inc. and Protection One Alarm Monitoring may terminate
their obligations under the indenture at any time by delivering all outstanding
notes to the trustee for cancellation and paying all sums payable by them
thereunder. Protection One, Inc. and Protection One Alarm Monitoring, at their
option,
(1) will be discharged from any and all obligations with respect
to the notes, except for some of the obligations of Protection
One Alarm Monitoring to register the transfer or exchange of
the notes, replace stolen, lost or mutilated notes, maintain
paying agencies and hold moneys for payment in trust, or
(2) need not comply with some of the restrictive covenants with
respect to the indenture, if Protection One Alarm Monitoring
deposits with the trustee, in trust, U.S. legal tender or U.S.
Government Obligations or a combination of these that, through
the payment of interest and premium on the notes and principal
in respect of the notes in compliance with their terms, will
be sufficient to pay all the principal of and interest and
premium on the notes on the dates the payments are due or
through any date of redemption, if earlier than the dates the
payments are due, in any case in compliance with the terms of
the notes, as well as the trustee's fees and expenses.
To exercise either option, Protection One Alarm Monitoring is required
to deliver to the trustee
(1) an Opinion of Counsel or a private letter ruling issued to
Protection One Alarm Monitoring by the Internal Revenue
Service that the holders of the notes will not recognize
income, gain or loss for federal income tax purposes as a
result of the deposit and related defeasance and will be
subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case
if the option had not been exercised and, in the case of an
Opinion of Counsel furnished in connection with a discharge
under clause (1) above, accompanied by a private letter ruling
issued to Protection One Alarm Monitoring by the IRS to that
effect,
(2) Subject to some qualifications, an Opinion of Counsel that the
funds deposited will not be subject to avoidance under
applicable bankruptcy law and
(3) an Officers' Certificate and an Opinion of Counsel that
Protection One Alarm Monitoring has complied with all
conditions precedent to the defeasance.
43
Notwithstanding the foregoing, the Opinion of Counsel required by clause (1)
above need not be delivered if all notes not previously delivered to the trustee
for cancellation
(1) have become due and payable,
(2) will become due and payable on the maturity date within one
year or
(3) are to be called for redemption within one year under
arrangements satisfactory to the trustee for the giving of
notice of redemption by the trustee in the name, and at the
expense, of Protection One Alarm Monitoring.
MODIFICATION OF THE INDENTURE
From time to time, Protection One, Inc., Protection One Alarm
Monitoring and the trustee, together, without the consent of the holders of the
notes, may amend or supplement the indenture for some specified purposes,
including curing ambiguities, defects or inconsistencies, or making any other
change that, in the good faith opinion of the Board of Directors of Protection
One, Inc., does not materially and adversely affect the rights of the Holders.
Other modifications and amendments of the indenture may be made with the consent
of the holders of a majority in principal amount of the then outstanding notes,
except that, without the consent of each holder of the notes affected thereby,
no amendment may, directly or indirectly:
(1) reduce the amount of notes whose holders must consent to an
amendment;
(2) reduce the rate of or change the time for payment of interest,
including defaulted interest, on any notes;
(3) reduce the principal of or change the fixed maturity of any
notes, or change the date on which any notes may be subject to
redemption or repurchase, or reduce the redemption or repurchase
price therefor;
(4) make any notes payable in money other than that stated in the
notes and the indenture;
(5) make any change in provisions of the indenture protecting the
right of each holder of a note to receive payment of principal
of, premium on and interest on the note on or after the due date
of the note or to bring suit to enforce the payment or
permitting holders of a majority in principal amount of the
notes to waive a Default or Event of Default; or
(6) after Protection One Alarm Monitoring's obligation to purchase
the notes arises under the indenture, amend, modify or change
the obligation of Protection One Alarm Monitoring to make or
consummate an Offer to Purchase or waive any default in the
performance of an Offer to Purchase or modify any of the
provisions or definitions with respect to any offer.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of
Protection One, Inc. or Protection One Alarm Monitoring, shall have any
liability for any obligations of Protection One, Inc. or Protection One Alarm
44
Monitoring under the notes or the indenture or for any claim based on, in
respect of, or by reason of the obligations or their creation. Each Holder by
accepting a note waives and releases all liability of directors, officers,
employees and stockholders. The waiver and release are part of the consideration
for issuance of the notes. The waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the SEC that this type
waiver is against public policy.
CONCERNING THE TRUSTEE
The indenture contains some limitations on the rights of the trustee,
should it become a creditor of Protection One, Inc. or Protection One Alarm
Monitoring, to obtain payment of claims in some cases, or to realize on some of
the property received in respect of any claim as security or otherwise. The
trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest, it must eliminate the conflict within 90
days, apply to the SEC for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, with some
exceptions. The indenture provides that in case an Event of Default shall occur,
which shall not be cured, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent person in the conduct of that
person's own affairs. Under these provisions, the trustee will be under no
obligation to exercise any of its rights or powers under the indenture at the
request of any holder of notes, unless the holder shall have offered to the
trustee security and indemnity satisfactory to it against any loss, liability or
expense.
GOVERNING LAW
The indenture provides that it and the notes will be governed by, and
construed in compliance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the laws of another jurisdiction would be required thereby.
DEFINITIONS
Set forth below is a summary of some of the defined terms used in the
indenture. Reference is made to the indenture for the full definition of all
these terms, as well as any other terms used in this "Description of the
Registered Notes" for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time that Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with Protection One, Inc. or any of its
Restricted Subsidiaries or assumed in connection with the acquisition of assets
from that Person and not incurred by that Person in connection with, or in
anticipation or contemplation of, that Person becoming a Restricted Subsidiary
or the acquisition, merger or consolidation.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Protection One, Inc. and its Restricted Subsidiaries, less
applicable depreciation, amortization and other valuation reserves, except to
the extent resulting from write-ups of capital assets, excluding write-ups in
connection with accounting for acquisitions in conformity with GAAP, after
deducting therefrom
45
(1) all current liabilities of the Protection One, Inc. and its
Restricted Subsidiaries, excluding intercompany items, and
(2) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles,
all as shown on the most recent quarterly or annual consolidated balance sheet
of the Protection One, Inc. and its Restricted Subsidiaries, prepared in
conformity with GAAP and filed with the SEC or provided to the trustee.
"Adjusted Treasury Rate" means with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue,
expressed as a percentage of its principal amount, equal to the Comparable
Treasury Price for the redemption date, plus 0.50%.
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, that Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means
(1) any transaction under which any Person shall become a Restricted
Subsidiary or shall be consolidated or merged with Protection
One, Inc. or any Restricted Subsidiary or
(2) the acquisition by Protection One, Inc. or any Restricted
Subsidiary of assets of any Person comprising a division or line
of business of the Person.
"Asset Sale" means any sale, transfer or other disposition, including
by way of merger, consolidation or sale-leaseback transaction, in one
transaction or a series of related transactions by Protection One, Inc. or any
of its Restricted Subsidiaries to any Person other than Protection One, Inc. or
any of its Restricted Subsidiaries of
(1) all or any of the Capital Stock of any Restricted Subsidiary
owned by Protection One, Inc. or any Restricted Subsidiary,
(2) all or substantially all of the property and assets of an
operating unit or business of Protection One, Inc. or any of its
Restricted Subsidiaries or
(3) any other property and assets (other than the Capital Stock or
other Investment in an Unrestricted Subsidiary or in any
Affiliate of Protection One, Inc. not controlled, directly or
indirectly, by Protection One, Inc.) of Protection One, Inc. or
any of its Restricted Subsidiaries outside the ordinary course
of business of Protection One, Inc. or the Restricted Subsidiary
and, in each case, that is not governed by the provisions of the
indenture applicable to mergers, consolidations and sales of
assets of Protection One, Inc.;
provided that "Asset Sale" shall not include
(a) sales, transfers or other dispositions of inventory,
receivables, equipment leases, capital lease
obligations and other current assets,
46
(b) sales, transfers or other dispositions of assets
constituting a Restricted Payment permitted to be made
under the "Limitation on Restricted Payments" covenant,
(c) bona fide sales, transfers or other dispositions of
assets for consideration, including cash equalization
payments, at least equal to the fair market value, as
determined by the Board of Directors of Protection One,
Inc., of the assets sold, transferred or disposed of, to
the extent that the consideration received would satisfy
clause (1)(b) of the "Limitation on Asset Sales"
covenant,
(d) sales or other dispositions of delinquent accounts
receivable for collection in the ordinary course of
business,
(e) sales or dispositions of obsolete assets or assets no
longer useful in the conduct of Protection One, Inc.'s
or the Restricted Subsidiary's business,
(f) sales or other dispositions resulting from any casualty
or condemnation of property,
(g) licenses and sublicenses of intellectual property and
general intangibles and licenses, leases or subleases in
the ordinary course of business, or
(h) sales or other dispositions of assets in any given
fiscal year in an amount less than or equal to $5
million.
"Business Day" means any day, other than a day which is a Saturday,
Sunday or legal holiday in the state of New York, on which banks are open for
business in New York, New York.
"Capital Stock" means
(1) with respect to any Person that is a corporation, any and all
shares, interests, participations or other equivalents,
however designated, of capital stock of the Person and
(2) with respect to any Person that is not a corporation, any and
all partnership or other equity interests of the Person.
"Capitalized Lease Obligation" means, as to any Person, the obligation
of the Person to pay rent or other amounts under a lease to which the Person is
a party that is required to be classified and accounted for as a capital lease
obligation under GAAP, and for purposes of this definition, the amount of the
obligation at any date shall be the capitalized amount of the obligation at that
date, determined in compliance with GAAP.
"Change of Control" means
(1) the consummation of any transaction, including, without
limitation, any merger or consolidation, the result of which
is that any "person" or "group," within the meaning of Section
13(d) and 14(d)(2) of the Exchange Act, other than the
Principal and its Related Parties, becomes the "beneficial
owner," as the term is defined in Rule 13d-3 and rule 13d-5
under the Exchange Act, directly or indirectly, of more than
50% of the total voting power of the Voting Stock of
Protection One, Inc. or Protection One Alarm Monitoring,
measured by voting power rather than number of shares, or
(2) the first day on which at least a majority of the members of
the Board of Directors of Protection One, Inc. or Protection
One Alarm Monitoring are not Continuing Directors.
"Change of Control Triggering Event" means the occurrence of both a
Change of Control and a Rating Decline.
47
"Commodity Agreement" means any commodity futures contract, commodity
option or other similar agreement or arrangement.
"Comparable Treasury Issue" means the United States Treasury Security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the notes that would be utilized, at the time of selection
and in compliance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
notes.
"Comparable Treasury Price" means, with respect to any redemption date,
(1) the average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its
principal amount) on the third Business Day preceding the
redemption date, as shown in the daily statistical release (or
any successor release) published by the Federal Reserve Bank
of New York and designated "Composite 3:30 p.m. Quotations for
U.S. Government Securities" or
(2) if the release, or any successor release, is not published or
does not contain the prices on the applicable Business Day,
(a) the Reference Treasury Dealer Quotations for the
redemption date, after excluding the highest and
lowest of the Reference Treasury Dealer Quotations,
or
(b) if the trustee obtains fewer than three Reference
Treasury Dealer Quotations, the average of all of the
Quotations.
"Consolidated EBITDA" means, for any period, the net income of
Protection One, Inc. and its Restricted Subsidiaries for the period plus, to the
extent the amount was deducted in calculating the net income
(1) Consolidated Interest Expense,
(2) income taxes,
(3) depreciation expense,
(4) amortization expense,
(5) all other non-cash items, extraordinary items, nonrecurring
and unusual items and cumulative effects of changes in
accounting principles reducing the net income, less all
non-cash items, extraordinary items, nonrecurring and unusual
items and cumulative effects of changes in accounting
principles increasing the net income, all as determined on a
consolidated basis for Protection One, Inc. and its Restricted
Subsidiaries in conformity with GAAP;
(6) upfront expenses resulting from equity offerings, investments,
mergers, recapitalizations, option buyouts, Dispositions,
Asset Acquisitions and similar transactions to the extent
these expenses reduce net income; and
(7) gains or losses on Dispositions;
48
provided that, Consolidated EBITDA shall not include
(a) the net income (or net loss) of any Person that is not a
Restricted Subsidiary, except
(i) with respect to net income, to the extent of the
amount of dividends or other distributions actually
paid to Protection One, Inc. or any of its Restricted
Subsidiaries by that Person during that period and
(ii) with respect to net losses, to the extent of the
amount of investments made by Protection One, Inc. or
any Restricted Subsidiary in that Person during that
period;
(b) solely for the purposes of calculating the amount of
Restricted Payments that may be made under the first
clause (3) of the "Limitation on Restricted Payments"
covenant described above, and in that case, except to
the extent includable under clause (a) above, the net
income, or net loss, of any Person accrued before the
date it becomes a Restricted Subsidiary or is merged
into or consolidated with Protection One, Inc. or any
Restricted Subsidiary or all or substantially all of the
property and assets of that Person are acquired by
Protection One, Inc. or any of its Restricted
Subsidiaries; and
(c) the net income of any Restricted Subsidiary, other than
Protection One Alarm Monitoring, to the extent that the
declaration or payment of dividends or similar
distributions by the Restricted Subsidiary of net income
is not at the time permitted by the operation of the
terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental
regulation applicable to the Restricted Subsidiary
(other than any agreement or instrument evidencing
Indebtedness or Preferred Stock outstanding on the Issue
Date or incurred or issued thereafter without violation
of the indenture; provided that the terms of any
agreement restricting the declaration and payment of
dividends or similar distributions apply only in the
event of a default with respect to a financial covenant
or a covenant relating to payment, beyond any applicable
period of grace, contained in the agreement or
instrument and provided the terms are determined by
Protection One, Inc. to be customary in comparable
financings and the restrictions are determined by
Protection One, Inc. not to materially affect Protection
One Alarm Monitoring's ability to make principal or
interest payments on the notes when due).
"Consolidated Interest Expense" means, with respect to Protection One,
Inc. for any period, without duplication, the sum of
(1) the interest expense of the Person and its Restricted
Subsidiaries for the period as determined on a consolidated
basis in compliance with GAAP, including, without limitation,
(a) any amortization of debt discount, other than discount
arising solely as a result of the Incurrence of
Indebtedness that is part of an investment unit together
with one or more additional securities,
(b) the net cost under Interest Swap Agreements, including
any amortization of discounts,
(c) the interest portion of any deferred payment obligation,
(d) all commissions, discounts and other fees and charges
owed with respect to letters of credit, bankers'
acceptance financing or similar facilities, and
49
(e) all accrued interest and
(2) the interest component of Capitalized Lease Obligations paid or
accrued by the Person and its Subsidiaries during the period as
determined on a consolidated basis in compliance with GAAP;
excluding, however,
(a) any amount of the interest of any Restricted Subsidiary
if the net income of the Restricted Subsidiary is
excluded in the calculation of Consolidated EBITDA under
clause (c) of the definition of Consolidated EBITDA, but
only in the same proportion as the net income of the
Restricted Subsidiary is excluded from the calculation
of Consolidated EBITDA under clause (c) of the
definition of Consolidated EBITDA; and
(b) the amortization of deferred financing costs related to
the issuance of the notes or to the funding of our
credit facility, all as determined on a consolidated
basis for Protection One, Inc. and its Restricted
Subsidiaries in conformity with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of Protection One, Inc. or Protection One Alarm
Monitoring, as applicable, who
(1) was a member of the Board of Directors on the date of the
indenture or
(2) was nominated for election or elected to the Board of Directors
with the approval of a majority of the Continuing Directors who
were members of the Board at the time of the nomination or
election.
"credit facility" means the Credit Agreement between Westar Capital and
Protection One Alarm Monitoring, dated April 1, 1998, as amended August 17,
1998, as that agreement may be amended, including any amendment and restatement
of the Credit Agreement, supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring, including by way of adding Subsidiaries of Protection
One Alarm Monitoring as additional borrowers or guarantors thereunder, all or
any portion of the Indebtedness under that agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders, it being agreed that the Revolving Credit Agreement to be
entered into on or about the date of the indenture among Protection One Alarm
Monitoring, as borrower, NationsBank, N.A., as administrative agent, and the
lenders party thereto from time to time shall, upon its execution and delivery,
constitute our credit facility for purposes of this definition.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Debt Rating" shall mean the rating assigned to the notes by Moody's or
S&P, as the case may be.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Indebtedness" means
(1) all Obligations under our credit facility and
50
(2) any other Senior Indebtedness of Protection One Alarm
Monitoring which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at
the date of determination, the holders thereof are committed
to lend up to, at least $35.0 million and is specifically
designated by Protection One Alarm Monitoring in the
instrument evidencing or governing the Senior Indebtedness as
"Designated Senior Indebtedness" for purposes of the
indenture.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving that Person (whether or
not that Person is the Surviving Person) or the sale, assignment, or transfer,
lease, conveyance or other disposition of all or substantially all of that
Person's assets or Capital Stock.
"Disqualified Capital Stock" means any Capital Stock that, by its
terms, or by the terms of any security into which it is convertible or for which
it is exchangeable, or upon the happening of any event, matures, excluding any
maturity as the result of an optional redemption by the issuer of Capital Stock,
or is mandatorily redeemable, under a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder of Capital Stock, except, in each
case, upon the occurrence of a Change of Control if the Capital Stock requires
that the Change of Control Offer with respect to the notes be completed before
any similar offer being made with respect to the Capital Stock, in whole or in
part, on or before the final maturity date of the notes; provided, however, that
only the portion of Capital Stock which so matures or is mandatorily redeemable
or is so redeemable at the sole option of the holder of Capital Stock before the
final maturity date of the notes shall be deemed Disqualified Capital Stock.
"GAAP" means generally accepted accounting principles in the United
States of America, including those shown in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or the SEC or in the other statements by the other entity as
approved by a significant segment of the accounting profession. All ratios and
computations based on GAAP contained in the indenture shall be computed in
conformity with GAAP as in effect on the date of the indenture.
"Guarantee" means a guarantee, other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner, including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof , of all or any part of any Indebtedness.
"Indebtedness" means with respect to any Person, without duplication,
any liability of the Person
(1) for borrowed money,
(2) evidenced by bonds, debentures, notes or other similar
instruments,
(3) constituting Capitalized Lease Obligations,
(4) incurred or assumed as the deferred purchase price of property
or services, or under conditional sale obligations and title
retention agreements, but excluding trade accounts payable
arising in the ordinary course of business,
51
(5) for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction,
(6) for Indebtedness of others guaranteed by the Person,
(7) for Interest Swap Agreements, Commodity Agreements and
Currency Agreements and
(8) for Indebtedness of any other Person of the type referred to
in clauses (1) through (7) which is secured by any Lien on any
property or asset of the first referred to Person, the amount
of the Indebtedness being deemed to be the lesser of the value
of the property or asset or the amount of the Indebtedness so
secured.
The amount of Indebtedness of any Person at any date shall be
(1) the outstanding principal amount of all unconditional
obligations described above, as the amount would be calculated
in compliance with GAAP,
(2) the accreted value of Indebtedness, in the case of any
Indebtedness issued with original issue discount and
(3) the principal amount of Indebtedness, together with any
interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
"Independent Investment Banker" means any Reference Treasury Dealer
appointed by the trustee after consultation with Protection One Alarm
Monitoring.
"Interest Swap Agreements" means any interest rate protection
agreement, interest rate future, interest rate option, interest rate swap,
interest rate cap or other interest rate hedge or arrangement.
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit, including, without limitation, by way of Guarantee
or similar arrangement; but excluding advances to customers or suppliers in the
ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable, prepaid expenses or deposits on the balance sheet of
Protection One, Inc. or its Restricted Subsidiaries, or capital contribution to,
by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others, or any purchase or
acquisition of Capital Stock, bonds, notes, debentures or other similar
instruments issued by, the Person and shall include
(1) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary and
(2) the retention of the Capital Stock, or any other Investment,
by Protection One, Inc. or any of its Restricted Subsidiaries,
of, or in, any Person that has ceased to be a Restricted
Subsidiary.
For purposes of the definition of "Unrestricted Subsidiary" and the "Limitation
on Restricted Payments" covenant, the amount of or a reduction in an Investment
shall be equal to the fair market value thereof at the time the Investment is
made or reduced.
52
"Investment Grade Status" exists as of a date and thereafter if at the
date either
(1) the Debt Rating of Moody's is at least Baa3 (or the equivalent)
or higher or
(2) the Debt Rating of S&P is at least BBB-- (or the equivalent) or
higher.
"Issue Date" means the date of original issuance of the notes.
"Interest Coverage Ratio" means, on any date, the ratio of
(1) the Consolidated EBITDA for the then most recently completed
fiscal quarter before the date for which reports have been filed
with the SEC or provided to the trustee (the "Quarter") to
(2) the aggregate Consolidated Interest Expense during the Quarter.
In making the foregoing calculation,
(a) pro forma effect shall be given to any Indebtedness
Incurred or repaid during the period (the "Reference
Period") commencing on the first day of the Quarter and
ending on the date of calculation other than
(i) Indebtedness Incurred or repaid under a
revolving credit or similar arrangement to the
extent of the commitment thereunder, or under
any predecessor revolving credit or similar
arrangement, in effect on the last day of the
Quarter unless any portion of the debt is
projected, in the reasonable judgment of the
senior management of Protection One Alarm
Monitoring, to remain outstanding for a period
in excess of 12 months from the date of the
Incurrence of Indebtedness and
(ii) Permitted Indebtedness incurred on the date of
calculation,
in each case as if the Indebtedness had been Incurred or
repaid on the first day of the Reference Period;
(b) Consolidated Interest Expense attributable to
interest on any Indebtedness, whether existing
or being Incurred, computed on a pro forma basis
and bearing a floating interest rate shall be
computed as if the rate in effect on the date of
calculation, taking into account any Interest
Swap Agreement applicable to the Indebtedness if
the Interest Swap Agreement has a remaining term
in excess of 12 months or, if shorter, at least
equal to the remaining term of the Indebtedness,
had been the applicable rate for the entire
period;
(c) pro forma effect shall be given to Asset Sales
and Asset Acquisitions (including giving pro
forma effect to the application of proceeds of
any Asset Sales to any discharge or other relief
from Indebtedness to which Protection One, Inc.
and the Restricted Subsidiaries are not liable
following the Asset Sale and for cost savings
resulting in connection with an Asset
Acquisition as anticipated in good faith to be
realized within the next 12 months whether or
not the cost savings could then be reflected in
pro forma financial statements under GAAP,
Regulation S-X promulgated by the SEC or any
other regulation or policy of the SEC; provided,
however, that the cost savings were identified
and quantified in good faith in an Officer's
Certificate delivered to the trustee
contemporaneously with the relevant calculation
of the Interest Coverage Ratio) that occur
during the Reference Period as if they had
occurred and the proceeds had been applied on
the first day of the Reference Period; and
53
(d) pro forma effect shall be given to asset sales
and asset acquisitions (including giving pro
forma effect to the application of proceeds of
any asset sale to any discharge or other relief
from Indebtedness to which Protection One, Inc.
and the Restricted Subsidiaries are not liable
following the asset sale and for cost savings
resulting in connection with an asset
acquisition as anticipated in good faith to be
realized within the next 12 months whether or
not those cost savings could then be reflected
in pro forma financial statements under GAAP,
Regulation S-X promulgated by the SEC or any
other regulation or policy of the SEC; provided,
however, that the cost savings were identified
and quantified in good faith in an Officer's
Certificate delivered to the trustee
contemporaneously with the relevant calculation
of the Interest Coverage Ratio) that have been
made by any Person that has become a Restricted
Subsidiary or has been merged with or into
Protection One, Inc. or any Restricted
Subsidiary during the Reference Period and that
would have constituted Asset Sales or Asset
Acquisitions had the transactions occurred when
the Person was a Restricted Subsidiary as if the
asset sales or asset acquisitions were Asset
Sales or Asset Acquisitions that occurred on the
first day of the Reference Period;
provided that to the extent that clause (c) or (d) of this sentence requires
that pro forma effect be given to an Asset Acquisition or Asset Sales, the pro
forma calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business of
the Person, that is acquired or disposed for which financial information is
available.
"Lien" means, with respect to any asset, any lien, mortgage, deed of
trust, pledge, security interest, charge or encumbrance of any kind, including
any conditional sale or other title retention agreement, any lease in the nature
thereof and any agreement to give any security interest.
"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business of Moody's.
"Net Cash Proceeds" means,
(1) with respect to any Asset Sale, the proceeds of the Asset Sale
in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations, to the extent
corresponding to the principal, but not interest, component of
the proceeds, when received in the form of cash or cash
equivalents and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of
(a) brokerage commissions and other fees and expenses,
including fees and expenses of counsel and investment
bankers, related to the Asset Sale,
(b) provisions for all taxes, whether or not the taxes will
actually be paid or are payable, as a result of the
Asset Sale without regard to the consolidated results of
operations of Protection One, Inc. and its Restricted
Subsidiaries, taken as a whole,
(c) payments made to repay debt or any other obligation
outstanding at the time of the Asset Sale that either
(i) is secured by a Lien on the property or assets sold
or
(ii) is required to be paid as a result of the sale and
(d) appropriate amounts to be provided by Protection One,
Inc. or any Restricted Subsidiary as a reserve against
any liabilities associated with the Asset Sale,
including, without limitation, pension and other
post-employment benefit liabilities, liabilities related
to environmental matters and liabilities under any
indemnification obligations associated with the Asset
Sale, all as determined in conformity with GAAP and
54
(2) with respect to any issuance or sale of Capital Stock, the
proceeds of the issuance or sale in the form of cash or cash
equivalents, including payments in respect of deferred payment
obligations, to the extent corresponding to the principal, but
not interest, component thereof, when received in the form of
cash or cash equivalents and proceeds from the conversion of
other property received when converted to cash or cash
equivalents, net of attorney's fees, accountants' fees,
underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees incurred
in connection with the issuance or sale and net of taxes paid
or payable as a result thereof.
"Offer to Purchase" means an offer to purchase notes by Protection One
Alarm Monitoring from the Holders commenced by mailing a notice to the trustee
and each Holder stating:
(1) the covenant under which the offer is being made and that all
notes validly tendered will be accepted for payment on a pro
rata basis;
(2) the purchase price and the date of purchase, which shall be a
Business Day no earlier than 30 days nor later than 60 days
from the date the notice is mailed, (the "Payment Date");
(3) that any note not tendered will continue to accrue interest
by its terms;
(4) that, unless Protection One Alarm Monitoring defaults in the
payment of the purchase price, any note accepted for payment
under the Offer to Purchase shall cease to accrue interest on
and after the Payment Date;
(5) that Holders electing to have a note purchased under the Offer
to Purchase will be required to surrender the note, together
with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of the note completed, to the
Paying Agent at the address specified in the notice before the
close of business on the Business Day immediately preceding
the Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of
business on the third Business Day immediately preceding the
Payment Date, a telegram, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of
notes delivered for purchase Holder is withdrawing his
election to have the notes purchased; and
(7) that Holders whose notes are being purchased only in part will
be issued registered notes equal in principal amount to the
unpurchased portion of the notes surrendered; provided that
each note purchased and each new note issued shall be in a
principal amount of $1,000 or integral multiples of $1,000.
The offer to purchase shall further describe the material facts and
circumstances related to the event with respect to which the particular Offer to
Purchase is being made, as determined in good faith by Protection One Alarm
Monitoring.
On the Payment Date, Protection One Alarm Monitoring shall
(1) accept for payment on a pro rata basis notes or portions of
notes validly tendered and not withdrawn under an Offer to
Purchase and, in the case of an Offer to Purchase under the
"Limitation on Asset Sales" covenant, having an aggregate
principal amount not in excess of the Excess Proceeds in
respect of the Offer to Purchase, subject to the provisions of
the covenant related to Pari Passu Indebtedness,
(2) deposit with the Paying Agent money sufficient to pay the
purchase price of all notes or portions accepted; and
(3) deliver, or cause to be delivered, to the trustee all notes or
portions accepted together with an Officers' Certificate
specifying the notes or portions accepted for payment by
Protection One Alarm Monitoring. The Paying Agent shall
55
promptly mail to the Holders of notes so accepted payment in
an amount equal to the purchase price, and the trustee shall
promptly authenticate and mail to the Holders a new note equal
in principal amount to any unpurchased portion of the note
surrendered;
provided, however, that each note purchased and each new note issued shall be in
a principal amount of $1,000 or integral multiples of $1,000. Protection One
Alarm Monitoring will publicly announce the results of an Offer to Purchase as
soon as practicable after the Payment Date. The trustee shall act as the Paying
Agent for an Offer to Purchase. Protection One Alarm Monitoring will comply with
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent the laws and regulations are applicable, if Protection
One Alarm Monitoring is required to repurchase notes under an Offer to Purchase.
To the extent that the provisions of any securities laws or regulations conflict
with the provisions for the Offer to Purchase, Protection One Alarm Monitoring
will comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations with respect to the Offer to Purchase by
virtue of its compliance with the applicable securities laws and regulations.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing, or otherwise relating to, any
Indebtedness.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the trustee. The counsel may be an employee of or
counsel to the Company or the trustee.
"Permitted Indebtedness" means, without duplication,
(1) Indebtedness outstanding on the Issue Date or on any
Reinstatement Date, including, without limitation, the
Convertible notes, Discount notes, Senior notes and
Capitalized Lease Obligations;
(2) Indebtedness of the Protection One, Inc. and any of its
Restricted Subsidiaries incurred under our credit facility,
including letter of credit obligations, provided that the
aggregate principal amount at any time outstanding does not
exceed $500.0 million, less any amount of the Indebtedness
permanently repaid as provided in the "Limitation on Asset
Sales" covenant;
(3) Indebtedness evidenced by or arising under the notes, the note
Guarantees and the indenture in respect of the notes;
(4) Interest Swap Agreements, Commodity Agreements and Currency
Agreements; provided, however, that the agreements are entered
into for bona fide hedging purposes and not for speculative
purposes;
(5) additional Indebtedness of the Protection One, Inc. or any of
its Restricted Subsidiaries not otherwise permitted under the
"Limitation on Incurrence of Additional Indebtedness"
covenant, in an aggregate principal amount that, when
aggregated with the aggregate principal amount of all other
Indebtedness then outstanding and incurred under this clause
(5), does not at any one time outstanding exceed the sum of
(a) $75 million and
(b) without duplication, 100% of the net proceeds received
by the Protection One, Inc. or any Restricted Subsidiary
from the issue or sale after the Issue Date of Qualified
Capital Stock, including upon the conversion or exchange
of any Indebtedness, including the Convertible notes, or
net proceeds contributed to the capital of the
Protection One, Inc. or any Restricted Subsidiary, other
than in respect of Disqualified Capital Stock, as
determined in compliance with the first clauses (3)(b)
and (3)(c) of the "Limitation on Restricted Payments"
covenant to the extent the net proceeds have not been
applied under the clause to make Restricted Payments or
56
to effect other transactions under the second paragraph
of the "Limitation on Restricted Payments" covenant, it
being understood that any Indebtedness incurred under
this clause (5) shall cease to be deemed incurred or
outstanding for purposes of this clause (5) from and
after the first date on which the Protection One, Inc.
could have incurred the Indebtedness under the first
paragraph of the "Limitation on Incurrence of Additional
Indebtedness" covenant without reliance upon this clause
(5), and the Indebtedness shall thereupon be deemed to
have been so incurred;
(6) Refinancing Indebtedness, other than in respect of
Indebtedness incurred under clauses (2) and (5) of this
definition;
(7) Indebtedness owed by the Protection One, Inc. to any
Restricted Subsidiary, so long as it shall remain a Restricted
Subsidiary of the Protection One, Inc., or by any Restricted
Subsidiary, so long as it remains a Restricted Subsidiary, to
the Protection One, Inc. or any Restricted Subsidiary;
(8) guarantees by the Protection One, Inc. or Restricted
Subsidiaries of any Indebtedness permitted to be incurred
under the indenture;
(9) Indebtedness in respect of performance bonds, reimbursement
obligations with respect to letters of credit, bankers'
acceptances, completion guarantees and surety or appeal bonds
provided by the Protection One, Inc. or any of its Restricted
Subsidiaries in the ordinary course of their business or
Indebtedness with respect to reimbursement type obligations
regarding workers' compensation claims;
(10) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar
obligations, or from guarantees or letters of credit, surety
bonds or performance bonds securing any obligations of the
Protection One, Inc. or any of its Restricted Subsidiaries
under those agreements, in each case incurred in connection
with the disposition of any business assets or Subsidiaries of
the Protection One, Inc., other than guarantees of
Indebtedness or other obligations incurred by any Person
acquiring all or any portion of the business assets or its
Restricted Subsidiaries for the purpose of financing the
acquisition, in a principal amount not to exceed the gross
proceeds, including non-cash proceeds, actually received by
the Protection One, Inc. or any of its Restricted Subsidiaries
in connection with the disposition; provided, however, that
the Indebtedness is not reflected on the balance sheet of the
Protection One, Inc. or any Restricted Subsidiary, contingent
obligations referred to in a footnote to financial statements
and not otherwise reflected on the balance sheet will not be
deemed to be reflected on the balance sheet for purposes of
this clause;
(11) Indebtedness, including but not limited to Capitalized Lease
Obligations, mortgage financings or purchase money
obligations, incurred for the purpose of financing all or any
part of the price or cost of the bona fide acquisition,
construction or improvement of property or assets, whether
through direct purchase of assets or the Capital Stock of any
Person owning the assets, or incurred to refinance any
purchase price or cost of acquisition, construction or
improvement, provided, however, that no Indebtedness may be
incurred under this clause (11) if the amount of Indebtedness
outstanding under this clause (11) exceeds 5% of the total
consolidated assets of the Protection One, Inc. and its
Subsidiaries as shown on its consolidated balance sheet as of
the most recently completed fiscal quarter before the
Incurrence of Indebtedness under this clause (11) for which
financial statements have been filed with the SEC or provided
to the trustee;
(12) additional Indebtedness incurred for the purpose of financing
all or any part of capital expenditures in an amount not to
exceed $25 million at any time outstanding; and
(13) Indebtedness of Persons that are acquired by the Protection
One, Inc. or any of its Restricted Subsidiaries or merged into
a Restricted Subsidiary in compliance with the terms of the
indenture; provided, however, that the Indebtedness is not
incurred in contemplation of the acquisition or merger; and
57
provided further that after giving effect to the acquisition
or merger, the Protection One, Inc. would be permitted to
incur at least $1.00 of additional Indebtedness, other than
Permitted Indebtedness, under the first paragraph of the
"Limitation on Incurrence of Additional Indebtedness"
covenant.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision of a governmental agency.
"Preferred Stock" of any Person means any Capital Stock of the Person
that has preferential rights to any other Capital Stock of the Person with
respect to dividends or redemptions or upon liquidation.
"Principal" means Western Resources, Inc.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Rating Category" means
(1) with respect to S&P, any of the following categories: AAA, AA,
A, BBB, BB, B, CCC, CC, C and D or equivalent successor
categories;
(2) with respect to Moody's any of the following categories: Aaa,
Aa, A, Baa, Ba, B, Caa, Ca and C or equivalent successor
categories, and
(3) the equivalent of the categories referred to in clauses
(1) and (2) above of S&P and Moody's used by another
Rating Agency.
In determining whether the rating of the notes has decreased by one or more
gradations, gradations within Rating Categories (+ and for S&P: 1, 2 and 3 for
Moody's; or the equivalent gradations for another Rating Agency) shall be taken
into account (e.g., with respect to S&P, a decline in a rating from BB+ to BB,
as well as from BB-- to B+, will constitute a decrease of one gradation).
"Rating Decline" means
(1) a decrease of two or more gradations, including gradations
within Rating Categories as well as between Rating Categories,
in the rating of the notes by either Rating Agency from the
rating of the notes by the Rating Agency or
(2) a withdrawal of the rating of the notes by either Rating
Agency, provided that the decrease or withdrawal occurs on, or
within 90 days after, the date of public notice of the
occurrence of a Change of Control or of the intention by the
Company to effect a Change of Control, which period shall be
extended so long as the rating of the notes is under publicly
announced consideration for possible downgrade by either
Rating Agency.
"Reference Treasury Dealer" means each of Morgan Stanley & Co.
Incorporated, Chase Securities Inc., First Union Capital Markets, a division of
Wheat First Securities, Inc., NationsBanc Montgomery Securities LLC and TD
Securities (USA) Inc. and their respective successors; provided, however, that
if any of the foregoing shall cease to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), Protection One Alarm
Monitoring shall substitute therefor another Primary Treasury Dealer.
58
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average as determined by
the trustee, of the bid and asked prices of the Comparable Treasury Issue,
expressed in each case as a percentage of its principal amount, quoted in
writing to the trustee by a Reference Treasury Dealer at 5:00 p.m. on the third
Business Day preceding the redemption date.
"Refinancing Indebtedness" means any refinancing by Protection One,
Inc. or its Restricted Subsidiaries of Indebtedness of Protection One, Inc. or
any of its Restricted Subsidiaries incurred in compliance with the "Limitation
on Incurrence of Additional Indebtedness" covenant that does not
(1) result in an increase in the aggregate principal amount of
Indebtedness, the principal amount to include, for purposes of
this definition, any premiums, fees, penalties or accrued
interest paid with the proceeds of the Refinancing
Indebtedness, of the Person or
(2) create Indebtedness with
(a) a Weighted Average Life to Maturity that is less than
the Weighted Average Life to Maturity of the
Indebtedness being refinanced or
(b) a final maturity earlier than the final maturity of
the Indebtedness being refinanced; provided that
Indebtedness of Protection One, Inc. or Protection
One Alarm Monitoring, other than Guarantor Senior
Indebtedness or Senior Indebtedness, as the case may
be, that is refinanced by issuing Indebtedness of any
Restricted Subsidiary, other than Protection One
Alarm Monitoring, shall not be deemed to be
Refinancing Indebtedness.
"Related Party" with respect to the Principal means
(1) any controlling stockholder or 80% (or more) owned Subsidiary
of the Principal or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of
which consist of the Principal and/or the other Persons
referred to in the immediately preceding clause (1).
"Remaining Scheduled Payments" means, with respect to each note to be
redeemed, the remaining scheduled payments of the principal and interest that
would be due after the related redemption date but for the redemption; provided,
however, that, if the redemption date is not an interest payment date with
respect to the note, the amount of the next succeeding scheduled interest
payment thereon will be reduced by the amount of interest accrued and unpaid to
the redemption date.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Senior Indebtedness; provided, however, that
if, and for so long as, any issue of Senior Indebtedness lacks [such] a
representative, then the Representative for the issue of Senior Indebtedness
shall at all times constitute the holders of a majority in outstanding principal
amount of the issue of Senior Indebtedness.
"Restricted Payment" means
(1) the declaration or payment of any dividend or the making of
any other distribution, other than dividends or distributions
payable in Qualified Capital Stock or in options, rights or
warrants to acquire Qualified Capital Stock or dividends or
distributions by a Restricted Subsidiary so long as in the
59
case of any dividend or distribution payable on or in respect
of any class or series of Capital Stock issued by a Restricted
Subsidiary other than a Wholly Owned Subsidiary, Protection
One, Inc. or a Restricted Subsidiary receives at least its pro
rata share of the dividend or distribution in compliance with
its interest in the Capital Stock on shares of the Company's
Capital Stock,
(2) the purchase, redemption, retirement or other acquisition for
value of any Capital Stock of Protection One, Inc., or any
warrants, rights or options to acquire shares of Capital Stock
of Protection One, Inc., other than through the exchange of
the Capital Stock or any warrants, rights or options to
acquire shares of any class of the Capital Stock for Qualified
Capital Stock or warrants, rights or options to acquire
Qualified Capital Stock,
(3) the voluntary or optional principal payment, or voluntary or
optional redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness of
Protection One, Inc., Protection One Alarm Monitoring or any
Subsidiary Guarantor that is subordinated in right of payment
to the notes or note Guarantees, and
(4) Investments in Unrestricted Subsidiaries or in Affiliates of
Protection One, Inc. that are not, directly or indirectly,
controlled by Protection One, Inc..
"Restricted Subsidiary" means a direct or indirect Subsidiary of the
Protection One, Inc. other than an Unrestricted Subsidiary and includes all of
the Subsidiaries of the Protection One, Inc. existing as of the Issue Date,
including Protection One Alarm Monitoring, unless the context otherwise
requires.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc., or any successor to the rating agency business of S&P.
"Secured Indebtedness" means any Indebtedness of Protection One, Inc.
or a Restricted Subsidiary secured by a Lien.
"Senior Indebtedness" means, whether outstanding on the Issue Date or
thereafter issued, all Indebtedness of Protection One Alarm Monitoring,
including interest, including interest accruing on or after the filing of, or
which would have accrued but for the filing of, any petition in bankruptcy or
for reorganization relating to Protection One Alarm Monitoring or any Restricted
Subsidiary whether or not a claim for post-filing interest is allowed in the
proceeding, and premium, if any, thereon, and other monetary amounts, including
fees, expenses, reimbursement obligations under letters of credit and
indemnities, owing in respect of the Indebtedness unless, in the instrument
creating or evidencing the Indebtedness or under which the same is outstanding,
it is provided that the obligations in respect of the Indebtedness ranks pari
passu with or subordinate to the notes; provided, however, that Senior
Indebtedness will not include
(1) any obligation of Protection One Alarm Monitoring to any
Restricted Subsidiary,
(2) any liability for federal, state, foreign, local or other
taxes owed or owing by Protection One Alarm Monitoring,
60
(3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business, including
Guarantees of the Indebtedness or instruments evidencing those
liabilities,
(4) any Indebtedness, Guarantee or obligation of Protection One
Alarm Monitoring that is expressly subordinate or junior in
right of payment to any other Indebtedness, Guarantee or
obligation of Protection One Alarm Monitoring, including any
Senior Subordinated Indebtedness, as to which the notes
expressly shall rank pari passu in right of payment, unless
the Senior Subordinated Indebtedness is expressly made junior
in right of payment to the notes, or
(5) obligations in respect of any Capital Stock.
"Senior Subordinated Indebtedness" means the notes, Convertible notes,
Discount notes, and any other Indebtedness of Protection One Alarm Monitoring
that specifically provides that the Indebtedness is to rank pari passu with the
notes in right of payment and is not subordinated by its terms in right of
payment to any Indebtedness or other obligation of the Company which is not
Senior Indebtedness.
"Significant Restricted Subsidiary" means any Restricted Subsidiary
that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, of the Securities Act, as the Regulation is in effect on the
Issue Date.
"Subsidiary," with respect to any Person, means
(1) any corporation of which the outstanding Capital Stock having
at least a majority of the votes entitled to be cast in the
election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, through one or more
intermediaries, by the Person or
(2) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly
or indirectly, through one or more intermediaries, owned by
the Person. Notwithstanding anything in the indenture to the
contrary, an Unrestricted Subsidiary shall not be deemed to be
a Restricted Subsidiary for purposes of the indenture.
"Subsidiary Guarantors" means each direct and indirect Restricted
Subsidiary of the Protection One, Inc. that is required to execute a Guarantee
under the indenture.
"Surviving Person" means, with respect to any Person involved in or
that makes any Disposition, the Person formed by or surviving the Disposition or
the Person to which the Disposition is made.
"Temporary Cash Investment" means any of the following:
(1) direct obligations of the United States of America or any
agency of the United States of America or obligations fully
and/or unconditionally guaranteed by the United States of
America or any agency of the United States of America;
(2) time deposit accounts, certificates of deposit and money
market deposits maturing within one year of the date of
acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any
61
state of the United States of America or any foreign country
recognized by the United States of America, and which bank or
trust company has capital, surplus and undivided profits
aggregating in excess of $100 million, or its foreign currency
equivalent, and has outstanding debt which is rated "A," or
the similar equivalent rating, or higher by at least one
nationally recognized statistical rating organization, as
defined in Rule 436 under the Securities Act, or any
money-market fund sponsored by a registered broker dealer or
mutual fund distributor;
(3) repurchase obligations with a term of not more than one year
for underlying securities of the types described in clause (1)
above entered into with a bank or trust company meeting the
qualifications described in clause (2) above;
(4) commercial paper, maturing not more than one year after the
date of acquisition, issued by a corporation, other than an
Affiliate of the Company, organized and in existence under the
laws of the United States of America, any state of the United
States of America or any foreign country recognized by the
United States of America with a rating at the time as of which
any investment therein is made of "P-1" or higher according to
Moody's or "A-1" or higher according to S&P; and
(5) securities with maturities of six months or less from the date
of acquisition issued or fully and unconditionally guaranteed
by any state, commonwealth or territory of the United States
of America, or by any political subdivision or taxing
authority of any state, commonwealth or territory of the
United States of America, and rated at least "A" by S&P or
Moody's.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by Protection One Alarm Monitoring or any Restricted Subsidiaries,
the date the Indebtedness is to be Incurred and, with respect to any Restricted
Payment, the date the Restricted Payment is to be made.
"Unrestricted Subsidiary" means
(1) any Subsidiary of Protection One, Inc. that at the time of
determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Restricted Subsidiary,
including any newly acquired or newly formed Subsidiary of
Protection One, Inc., other than Protection One Alarm
Monitoring, to be an Unrestricted Subsidiary unless the
Subsidiary owns any Capital Stock of, or owns or holds any Lien
on any property of, Protection One, Inc. or any Restricted
Subsidiary; provided that
(a) any Guarantee by Protection One, Inc. or any Restricted
Subsidiary of any Indebtedness of the Subsidiary being
so designated shall be deemed an "Incurrence" of the
Indebtedness and the "Investment" by Protection One,
Inc. or the Restricted Subsidiary (or both, if
applicable) at the time of designation;
(b) either
(i) the Subsidiary to be so designated has total
assets of $1,000 or less or
(ii) if the Subsidiary has assets greater than
$1,000, the designation would be permitted under
the "Limitation on Restricted Payments" covenant
described above and
62
(c) if applicable, the Incurrence of Indebtedness and the
Investment referred to in clause (a) of this proviso
would be permitted under the "Limitation on
Incurrence of Additional Indebtedness" and
"Limitation on Restricted Payments."
The Board of Directors may designate any Unrestricted Subsidiary to be
a Restricted Subsidiary; provided, however, that
(1) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to the
designation and
(2) all Indebtedness of the Unrestricted Subsidiary outstanding
immediately after the designation would, if Incurred at the
time, have been permitted to be Incurred, and shall be deemed
to have been Incurred, for all purposes of the indenture.
Any designation by the Board of Directors shall be evidenced to the
trustee by promptly filing with the trustee a copy of the Board Resolution
giving effect to the designation and an Officers' Certificate certifying that
the designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations, or certificates
representing an ownership interest in the obligations, of the United States of
America, including any agency or instrumentality of the United States of
America, for the payment of which the full faith and credit of the United States
of America is pledged and which are not callable or redeemable at the issuer's
option.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing
(1) the then outstanding aggregate principal amount of the
Indebtedness into
(2) the total of the product obtained by multiplying
(a) the amount of each then remaining installment,
sinking fund, serial maturity or other required
payment of principal, including payment at final
maturity, in respect thereof, by
(b) the number of years, calculated to the nearest
one-twelfth, which will elapse between the date and
the making of the payment.
"Wholly Owned Subsidiary" means, with respect to any Subsidiary of any
Person, the ownership of all of the outstanding Capital Stock of the Subsidiary,
other than any director's qualifying shares or shares owned by foreign nationals
to the extent mandated by applicable law, by the Person or one or more Wholly
Owned Subsidiaries of the Person.
BOOK - ENTRY; DELIVERY AND FORM
Except as shown below, your registered notes will be represented by one
or more permanent global certificates in definitive, fully registered form. The
global certificate will be deposited with, or on behalf of, The Depository Trust
Company and registered in the name of a nominee of The Depository Trust Company.
Persons who have accounts with the The Depository Trust Company are referred to
herein as participants.
The Global Certificate. We expect that under procedures established by
The Depository Trust Company
63
(1) upon the issuance of the global certificate, The Depository
Trust Company or its custodian will credit, on its internal
system, the aggregate principal amount of registered notes of
your beneficial interest represented by these global
securities to your account if you have an account with The
Depository Trust Company and
(2) your ownership of a beneficial interest in the global
certificate will be shown on, and the transfer of your
ownership will be effected only through, records maintained by
The Depository Trust Company or its nominee, if you are a
participant, and the records of participants, if you hold your
interest through a participant.
You may own a beneficial interest in the global certificate only if you
have an account with The Depository Trust Company or if you hold your interest
through a person with an account with The Depository Trust Company.
So long as The Depository Trust Company, or its nominee, is the
registered owner or holder of the registered notes, The Depository Trust Company
or its nominee, as the case may be, will be considered the sole owner or holder
of your registered notes represented by the global certificate for all purposes.
If you have an interest in the global certificate, you will not be able to
transfer that interest except in compliance with The Depository Trust Company's
procedures, in addition to those procedures provided for in the indenture.
Payments of the principal, premium, if any, and interest on the global
certificate will be made by to The Depository Trust Company or its nominee, as
the case may be, as the registered owner of the global certificate. Neither we,
the trustee, the paying agent nor the registrar will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of your interest in the global certificate or for maintaining, supervising or
reviewing any records relating to your interest.
We expect that The Depository Trust Company, or its nominee, upon
receipt of any payment of principal, premium, if any, and interest in respect of
the global certificate, will credit your account, if are a participant, with
payments proportionate to your beneficial interest in the principal amount of
the global certificate as shown on the records of The Depository Trust Company
or its nominee. We also expect that, if you hold your beneficial interest in the
global certificate through a participant, payments to you will be governed by
standing instructions and customary practice, as is now the case with securities
held for the accounts of customers registered in the names of nominees. These
payments will be the responsibility of participants who hold your interest.
If you have are a participant and transfer your registered notes to a
participant, the transaction will effected in the ordinary way in compliance
with The Depository Trust Company rules and will be settled in clearinghouse
funds. If you require delivery of a certificated security for any reason,
including to sell registered notes to persons in states that require physical
delivery of the certificate, or to pledge your securities, you must transfer
your interest in the global certificate in compliance with the normal procedures
of The Depository Trust Company and with the procedures found in the indenture.
The Depository Trust Company has advised us that it will take any
action permitted to be taken by you, including the presentation of registered
notes for exchange as described below, only at the direction of one or more
participants to whose account the The Depository Trust Company interests in the
global certificate are credited and only as to the notes specified by the
participants.
The Depository Trust Company has advised us as follows:
(1) The Depository Trust Company is a limited purpose trust
company organized under the laws of the State of New York,
64
(2) a member of the Federal Reserve System,
(3) a "clearing corporation" within the meaning of the Uniform
Commercial Code and
(4) a "Clearing Agency" registered under the provisions of Section
17 A of the Exchange Act.
The Depository Trust Company was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in the
accounts of participants, eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and some other organizations. Indirect
access to the The Depository Trust Company system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Although The Depository Trust Company has agreed to the foregoing
procedures to facilitate transfers of interests in the global certificate among
participants, it is under no obligation to perform these procedures, and these
procedures may be discontinued at any time. Neither we nor the trustee will have
any obligations under the rules and procedures governing their operations.
Certificated Securities. If at any time The Depository Trust Company is
unwilling or unable to continue as depositary for the global certificate and we
do not appoint a successor within 90 days, certificated securities will be
issued in exchange for the global certificate.
65
PLAN OF DISTRIBUTION
Based on an interpretation by the staff of the SEC in no-action letters
issued to third parties in similar transactions, we believe that registered
notes issued to you in the exchange offer in exchange for your outstanding notes
may be offered for resale, resold and otherwise transferred by you, unless you
are our "affiliate" within the meaning of Rule 405 under the Securities Act,
without compliance with the registration and prospectus delivery provisions of
the Securities Act. However, this applies only if your registered notes are
acquired in the ordinary course of your business and you have no arrangement
with any person to participate in the distribution of your registered notes. We
refer you to the "Morgan Stanley & Co. Inc." SEC No-Action Letter available June
5, 1991, "Exxon Capital Holdings Corporation" SEC No-Action Letter available May
13, 1988 and "Shearman & Sterling" SEC No-Action Letter available July 2, 1993
for support of our belief.
If you are a broker-dealer that receives registered notes for your own
account in the exchange offer, you must acknowledge that you will deliver a
prospectus with any resale of the registered notes. This prospectus may be used
by you in connection with resales of your registered notes received in exchange
for outstanding notes where your outstanding notes were acquired as a result of
market-making activities or other trading activities. We have agreed that, for a
period of 180 days after the expiration date, we will make this prospectus, as
amended or supplemented, available to you for use in connection with any resale.
In addition, until , 1999, if you are a broker-dealer effecting transactions in
the registered notes you may be required to deliver this prospectus.
If you are a broker-dealer and receive your registered notes for your
own account in the exchange offer, you may sell from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on your registered notes or a combination of these
methods of resale, at market prices prevailing at the time of resale, at prices
related to the prevailing market prices or negotiated prices. Your resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer or
the purchasers of any registered notes. If you are a broker-dealer that resells
registered notes that were received by you for your own account and you
participate in a distribution of your registered notes, you may be deemed to be
an underwriter within the Securities Act, and any profit on any resale of
registered notes, commissions or concessions received by you may be underwriting
compensation under the Securities Act of 1933. The letter of transmittal states
that by acknowledging that you will deliver and by delivering a prospectus
meeting the requirements of the Securities Act of 1933, you will not be
admitting that you are an underwriter within the meaning of the Securities Act
of 1933.
We have agreed to pay all expenses incident to the exchange offer,
including the expenses of one counsel for the holders of the outstanding notes,
other than commissions or concessions of any broker-dealers. We have agreed to
indemnify you, including any broker-dealers, against some liabilities, including
some liabilities under the Securities Act.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes material federal income tax
consequences of the exchange of the outstanding notes under existing federal
income tax law. These consequences may change in the future, and affect you
adversely. This summary does not discuss all aspects of federal income taxation
which may be relevant to you in light of your personal investment circumstances
or if you receive special treatment under the federal income tax laws because
66
you are a financial institution, insurance company, tax-exempt organization,
broker-dealer, or foreign taxpayer. This summary does not discuss any aspects of
other federal taxes or state, local, or foreign tax law and assumes that you
hold and will continue to hold your outstanding notes for investment as capital
assets under the Internal Revenue Code of 1986. You are advised to consult your
tax advisors as to the specific tax consequences of exchanging your outstanding
notes, including the application and effect of federal, state, local and foreign
income and other tax laws.
An exchange of your outstanding notes for registered notes should not
be treated as an event in which gain or loss, if any, is realized for federal
income tax purposes, because the terms of your registered notes do not differ
materially in kind or extent from the terms of your outstanding notes. As a
result, you should not recognize any gain or loss for federal income tax
purposes if you participate in the exchange offer, and the registered notes
received in the exchange offer should be treated as a continuation of your
outstanding notes surrendered in the exchange offer. You should have the same
basis and holding period in your registered notes as you had in your outstanding
old note.
LEGAL MATTERS
Weil, Gotshal & Manges LLP, Dallas, Texas and New York, New York will
pass upon the legal matters on the validity of the registered notes being
offered hereby.
EXPERTS
The consolidated financial statements and schedules of Protection One,
Inc. as of December 31, 1998 and 1997 (restated) and for the years ended
December 31, 1998, 1997 (restated) and 1996, and its accounting predecessor,
Westinghouse Security, appearing in its Annual Reports (Forms 10-K) for the year
ended December 31, 1998, have been audited by Arthur Andersen LLP, independent
public accountants as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving such reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement with the SEC under the
Securities Act for the registered notes. This prospectus does not include all of
the information included in the registration statement. The registration
statement includes exhibits and schedules containing documents and information
about us that you may find important. You should read these exhibits and
schedules for a more complete understanding of the document or matter involved.
You can read or copy the complete registration statement and its exhibits and
schedules at the public reference section of the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices at 7
World Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may call the
SEC at 1-800-SEC-0330 for further information on its public reference rooms or
visit the SEC's web site at http://www.sec.gov which contains reports, proxy and
information statements and other information filed electronically with the SEC.
We are required to file annual, quarterly and special reports with the
SEC. The indentures governing your notes require us to prepare and deliver
copies of these reports and other information to you upon your request, at no
cost to you.
67
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, meaning that we can disclose important information by referring you
to those documents. The information incorporated by reference is considered to
be part of this prospectus and information filed later with the SEC will update
and supercede the information then on file. We incorporate by reference the
documents listed below and any future filings made with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act until the exchange offer is
completed.
1. The Annual Report on Form 10-K for the year ended December 31, 1998
filed with the SEC on April 14, 1999;
2. The Current Reports on Form 8-K filed with the SEC on January 26, 1999,
February 1, 1999, March 25, 1999 and April 1, 1999; and
3. The Proxy Statement on Schedule 14A filed with the SEC on April 23,
1999.
On the request of any person to whom a copy of this prospectus is
delivered, we will provide, without charge, a copy of any or all of the
documents incorporated by reference, other than exhibits to those documents that
are not specifically incorporated by reference. Written requests for copies
should be directed to Protection One, Inc., 600 Corporate Pointe, 12th Floor,
Culver City, California 90230, phone (310) 342-6300, Attention: Investor
Relations.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone to provide you with different or additional information. We are not
making an offer to sell any notes in any state or country where the exchange
offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of this prospectus or that prospectus supplement.
68
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, THE INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE
SECURITIES TO WHICH IT RELATES, OR ANY OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS [SET FORTH] IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS
PROSPECTUS.
TABLE OF CONTENTS
PAGE
Prospectus Summary........................... 1
Risk Factors................................. 8
Forward-Looking Statements .................. 16
Ratio of Earnings to Fixed Charges .......... 16
The Exchange Offer........................... 18
Description of the Registered Notes.......... 26
Plan of Distribution......................... 66
Material Federal Income Tax Consequences..... 66
Legal Matters................................ 67
Experts...................................... 67
Where You Can Find More Information.......... 67
Information Incorporated by Reference........ 68
UNTIL ________, 1999, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
================================================================================
OFFER TO EXCHANGE ALL OUTSTANDING
8 1/8% SENIOR SUBORDINATED
NOTES DUE 2009
FOR
8 1/8% SERIES B SENIOR SUBORDINATED
NOTES DUE 2009
OF
PROTECTION ONE ALARM MONITORING, INC.
UNCONDITIONALLY GUARANTEED BY
PROTECTION ONE, INC.
----------------------
PROSPECTUS
----------------------
, 1999
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificates of Incorporation and the Bylaws of Protection One,
Inc., Protection One Alarm Monitoring, Inc., Network Multi-Family Security
Corporation, Protection One/International, Inc., Protection One Investments,
Inc. and Comsec/Narragansett Security Corporation, provide for the
indemnification of directors and officers to the fullest extent permitted by the
General Corporation Law of the State of Delaware (the "DGCL"). Under the
provisions of Section 145 of the DGCL, each of Protection One, Inc. and
Protecetion One Alarm Monitoring, Inc. has the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding by reason of the fact that he is or was
a director, officer, employee, or agent of the company against any and all
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with the action, suit or proceeding. The power
to indemnify under the DGCL only applies if the person acted in good faith and
in a manner he reasonably believed to be in the best interest, or not opposed to
the best interest, of the company and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Indemnification is not available if the person has been adjudged to
have been liable to Protection One Alarm Monitoring, Inc., unless and only to
the extent that the Court of Chancery or the court in the action determines
that, despite the adjudication of liability, but in view of all of the
circumstances, the person is reasonably and fairly entitled to indemnification
for the expenses as the court shall deem proper. The statutes also expressly
provide that the power to indemnify authorized thereby is not exclusive of any
rights granted under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise.
The above discussion of the Certificates of Incorporation and Bylaws of
Protection One, Inc., Protection One Alarm Monitoring, Inc. and Section 145 of
the DGCL is not intended to be exhaustive and is qualified in its entirety by
reference thereto.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
Protection One, Inc. and Protection One Alarm Monitoring, Inc. under the
foregoing provisions, or otherwise, Protection One, Inc. and Protection One
Alarm Monitoring, Inc. have been advised that in the opinion of the SEC, the
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. In the event that a claim for indemnification
against the liabilities (other than the payment of expenses incurred or paid by
a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by a director, officer or
controlling person in connection with the securities being registered,
Protection One, Inc. and Protection One Alarm Monitoring, Inc. will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether the
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of the issue.
II-1
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
EXHIBIT
NO. DESCRIPTION
--- -----------
2.1 --Contribution Agreement dated as of July 30, 1997 (the
"Contribution Agreement"), between Western Resources and Protection
One, Inc. ("POI") (incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K filed by POI(1) and Protection One Alarm
Monitoring, Inc. ("Monitoring")(2) dated July 30, 1997 (the "July
1997 Form 8-K")).
2.2 --Amendment No. 1 dated October 2, 1997, to the Contribution
Agreement (incorporated by reference to Exhibit 99.1 to the Current
Report of Form 8-K filed by POI and Protection One Alarm Monitoring
dated October 2, 1997).
2.3 --Assignment and Assumption Agreement (Centennial Security Holdings,
Inc.) dated as of November 24, 1997, among Western Resources, Westar
Capital, Inc. ("Westar Capital"), Westar Security, Inc. ("Westar
Security") and POI (incorporated by reference to Exhibit 2.3 to the
Current Report on Form 8-K filed by POI and Protection One Alarm
Monitoring dated November 24, 1997 (the "November 1997 Form 8-K")).
2.4 --Assignment and Assumption Agreement (Guardian International Inc.)
dated as of November 24, 1997, among Western Resources, Westar
Capital, Westar Security and POI (incorporated by reference to
Exhibit 2.4 to the November 1997 Form 8-K).
2.5 --Stock Purchase Agreement dated as of October 2, 1997, among
Centennial Security Holdings, Inc. ("Centennial"), the shareholders
of Centennial and Westar Capital (incorporated by reference to
Exhibit 2.5 to the November 1997 Form 8-K).
2.6 --Stock Subscription Agreement dated as of October 4, 1997, between
Guardian International, Inc. ("Guardian") and Westar Capital
(incorporated by reference to Exhibit 2.6 to the November 1997 Form
8-K).
2.7 --Asset Purchase Agreement among Multimedia Security Service, Inc.,
Multimedia Cablevisions, Inc. and Protection One Alarm Monitoring
dated January 15, 1998 (incorporated by reference to Exhibit 10.3 to
Quarterly Report on Form 10-Q filed by POI and Protection One Alarm
Monitoring on May 14, 1998).
2.8 --Conditional Purchase Agreement, dated as of August 6, 1998,
between certain directors and/or officers of Compagnie Europeenne de
Telesecuritie and Protection One Alarm Monitoring (incorporated by
reference to Exhibit 2.8 to the Annual Report on Form 10-K for the
year ended December 31, 1998 (the "1998 Form 10-K")).
2.9 --Stock Subscription Agreement, dated as of October 21, 1998,
between Guardian and Westar Security (incorporated by reference to
Exhibit 2.9 to the 1998 Form 10-K).
2.10 --Amended and Restated Agreement and Plan of Contribution and Merger
dated as of October 21, 1998 by and among POI, Protection
Acquisition Holding Corporation, P-1 Merger Sub, Inc. (Mass.), P-1
Merger Sub, Inc. (Del.) and Lifeline Systems, Inc. (incorporated by
reference to Exhibit 2.1 to Registration Statement on Form S-4 of
Protection One Acquisition Holding Corporation filed on December 10,
1998).
3.1 --Fifth Amended and Restated Certificate of Incorporation of POI, as
amended (incorporated by reference to Exhibit 3.1 to the Annual
Report on Form 10-K filed by POI and Protection One Alarm Monitoring
for the year ended September 30, 1997 (the "Fiscal 1997 Form
10-K")).
3.2 --Bylaws of POI (incorporated by reference to Exhibit 3.1 to the
Quarterly Report on Form 10-Q filed by POI and Protection One Alarm
Monitoring for the quarter ended March 31, 1996).
II-2
3.3 --Certificate of Incorporation of Protection One Alarm Monitoring,
as amended (incorporated by reference to Exhibit 3.2 to the
Registration Statement on Form S-3 (Registration Number 333-09401)
originally filed by Protection One Alarm Monitoring and, inter alia,
POI on August 1, 1996 (the "August 1996 Form S-3")).
3.4 --Bylaws of Protection One Alarm Monitoring (incorporated by
reference to Exhibit 3.2 to the Annual Report on Form 10-K filed by
POI and, inter alia, Protection One Alarm Monitoring for the year
ended September 30, 1994).
4.1 --Indenture dated as of May 17, 1995, among Protection One Alarm
Monitoring, as Issuer, POI, inter alia, as Guarantor, and The First
National Bank of Boston ("FNBB"), as trustee (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form S-4
(Registration No. 33-94684) originally filed by POI and, inter alia,
Protection One Alarm Monitoring on July 18, 1995 (the "1995 Form
S-4")).
4.2 --First Supplemental Indenture dated as of July 26, 1996, among
Protection One Alarm Monitoring, as Issuer, POI, inter alia, as
Guarantor and State Street Bank and Trust Company ("SSBTC") as
successor to FNBB as trustee (incorporated by reference to Exhibit
4.2 to the Annual Report on Form 10-K filed by POI and Protection
One Alarm Monitoring for the year ended September 30, 1996 (the
"Fiscal 1996 Form 10-K")).
4.3 --Second Supplemental Indenture dated as of October 28, 1996, among
Protection One Alarm Monitoring as Issuer, POI inter alia, as
Guarantor and SSBTC as trustee (incorporated by reference to Exhibit
4.3 to the Fiscal 1996 Form 10-K)).
4.4 --Subordinated Debt Shelf Indenture dated as of August 29, 1996,
among Protection One Alarm Monitoring as Issuer, POI as Guarantor
and SSBTC as trustee (incorporated by reference to Exhibit 4.3 to
the August 1996 Form S-3).
4.5 --Supplemental Indenture No. 1 dated as of September 20, 1996, among
Protection One Alarm Monitoring as Issuer, POI, inter alia, as
Guarantor and SSBTC as trustee (incorporated by reference to Exhibit
4.1 to the Current Report on Form 8-K filed by POI and Protection
One Alarm Monitoring and dated September 20, 1996 (the "September
1996 Form 8-K")).
4.6 --Supplemental Indenture No. 2 dated as of October 28, 1996, among
Protection One Alarm Monitoring as Issuer, POI, inter alia, as
Guarantor and SSBTC as trustee (incorporated by reference to Exhibit
4.6 to the Fiscal 1996 Form 10-K).
4.7 --Amended and Restated Credit Agreement dated as of June 7, 1996,
among Protection One Alarm Monitoring, Heller Financial, Inc.
("Heller Financial") as Agent and the financial institutions
signatory thereto (the "Lenders") (incorporated by reference to
Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by POI and
Protection One Alarm Monitoring for the quarter ended June 30,
1996).
4.8 --Consent and First Amendment to Credit Agreement dated as of
September 16, 1996, among Protection One Alarm Monitoring, Heller
Financial as Agent and the Lenders (incorporated by reference to
Exhibit 10.1 to the September 1996 Form 8-K).
4.9 --Second Amendment to Amended and Restated Credit Agreement dated as
of March 31, 1997, among Protection One Alarm Monitoring, Heller
Financial as Agent and the Lenders (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by POI and
Protection One Alarm Monitoring for the quarter ended March 31,
1997).
4.10 --Third Amendment to Amended and Restated Credit Agreement dated as
of September 30, 1997, among Protection One Alarm Monitoring, Heller
Financial as Agent and the Lenders (incorporated by reference to
Exhibit 4.10 to the Fiscal 1997 Form 10-K).
4.11 --Form of Revolving Note executed by Protection One Alarm Monitoring
in favor of each Lender under the Amended and Restated Credit
Agreement filed as Exhibit 4.7 (incorporated by reference to Exhibit
4.9 to the Fiscal 1996 Form 10-K).
II-3
4.12 --Amended and Restated Guaranty dated as of June 7, 1996, executed
by POI in favor of Heller Financial as Agent (incorporated by
reference to Exhibit 4.10 to the Fiscal 1996 Form 10-K).
4.13 --Amended and Restated Stock Pledge Agreement dated as of June 7,
1996, between POI and Heller Financial as Agent (incorporated by
reference to Exhibit 4.11 to the Fiscal 1996 Form 10-K).
4.14 --Amended and Restated Security Agreement dated as of June 7, 1996,
between Protection One Alarm Monitoring and Heller Financial as
Agent (incorporated by reference to Exhibit 4.12 to the Fiscal 1996
Form 10-K).
4.15 --Amended and Restated Continuing Security Interest and Conditional
Assignment of Patents, Trademarks, Copyrights and Licenses dated as
of June 7, 1996, between Protection One Alarm Monitoring and Heller
Financial as Agent (incorporated by reference to Exhibit 4.13 to the
Fiscal 1996 Form 10-K).
4.16 --Indenture, dated as of August 17, 1998, among Protection One Alarm
Monitoring, as issuer, POI as guarantor, and The Bank of New York,
as trustee (incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form 9-4 filed by POI and Protection One
Alarm Monitoring on September 22, 1998).
4.17 --Indenture, dated as of December 21, 1998, among Protection One
Alarm Monitoring, as issuer, POI, as guarantor, and The Bank of New
York, as trustee (incorporated by reference to Exhibit 4.17 to the
1998 Form 10-K).
5.1 --Legal opinion of Weil, Gotshal & Manges LLP as to the validity of
the registered notes.++
10.1 --Stock Purchase Warrant dated as of September 16, 1991, issued by
POI to Merita Bank, Ltd. (formerly Kansallis-Osake-Pankki)
(incorporated by reference to Exhibit 10.25 to the Quarterly Report
on Form 10-Q filed by POI and, inter alia, Protection One Alarm
Monitoring for the quarter ended March 31, 1994).
10.2 --Amended and Restated Stockholders' Agreement dated as of August
15, 1994, among POI and the stockholders of POI named therein
(incorporated by reference to Exhibit 10.42 to the Registration
Statement on Form S-1 (Registration No. 33-81292) originally filed
by POI on July 8, 1994).
10.3 --Warrant Agreement dated as of November 3, 1993, between Protection
One Alarm Monitoring and United States Trust Company of New York, as
Warrant Agent (incorporated by reference to Exhibit 4.3 to the
Registration Statement on Form S-4 (Registration Statement 33-73002)
originally filed by POI, Protection One Alarm Monitoring and certain
former subsidiaries of Protection One Alarm Monitoring on December
15, 1993 (the "1993 Form S-4")).
10.4 --Registration Rights Agreement dated as of November 3, 1993, among
Protection One Alarm Monitoring, POI, certain former subsidiaries of
Protection One Alarm Monitoring and Bear, Stearns & Co., Inc.
(incorporated by reference to Exhibit 4.4 to the 1993 Form S-4).
10.5 --Warrant Agreement dated as of May 17, 1995, between POI and The
First National Bank of Boston, as Warrant Agent (incorporated by
reference to Exhibit 10.40 to the 1995 Form S-4).
10.6 --Common Stock Registration Rights Agreement dated May 17, 1995,
among POI, Morgan Stanley & Co. Incorporated and Montgomery
Securities (incorporated by reference to Exhibit 10.41 to the 1995
Form S-4).
10.7 --Employment Agreement dated as of November 24, 1997, between
Protection One and James M. Mackenzie, Jr. (incorporated by
reference to Exhibit 10.4 to the November 1997 Form 8-K).*
10.8 --Employment Agreement dated as of November 24, 1997, between
Protection One and John W. Hesse (incorporated by reference to
Exhibit 10.5 to the November 1997 Form 8-K).*
II-4
10.9 --Employment Agreement dated as of November 24, 1997, between
Protection One and John E. Mack III (incorporated by reference to
Exhibit 10.6 to the November 1997 Form 8-K).*
10.10 --Employment Agreement dated as of November 24, 1997, between
Protection One and Thomas K. Rankin (incorporated by reference to
Exhibit 10.7 to the November 1997 Form 8-K).*
10.11 --Employment Agreement dated as of November 3, 1993, between
Protection One Alarm Monitoring and George A. Weinstock
(incorporated by reference to Exhibit 10.13 to the 1993 Form S-4).*
10.12 --Non-Competitive and Non-Solicitation Agreement dated as of
November 3, 1993, between Protection One Alarm Monitoring and George
A. Weinstock (incorporated by reference to Exhibit 10.14 to the 1993
Form S-4).*
10.13 --Consulting Agreement dated as of February 19, 1996, between POI
and Dr. Ben Enis (incorporated by reference to Exhibit 10.7 to the
Quarterly Report on Form 10-Q filed by POI and Protection One Alarm
Monitoring for the quarter ended June 30, 1996).*
10.14 --1994 Stock Option Plan of POI, as amended (incorporated by
reference to Exhibit 10.23 to the Fiscal 1996 Form 10-K).*
10.15 --1997 Long-Term Incentive Plan of POI (incorporated by reference to
Appendix F to POI's proxy statement dated November 7, 1997).*
10.16 --Notes Registration Rights Agreement dated as of May 17, 1995,
among POI, Protection One Alarm Monitoring, Morgan Stanley & Co.,
Incorporated and Montgomery Securities (incorporated by reference to
Exhibit 4.2 to the 1995 Form S-4).
10.17 --Agreement for Purchase and Sale of Assets, dated May 25, 1995,
between Alert Centre, Inc. and Protection One Alarm Monitoring
(incorporated by reference to Exhibit 4.2 to the 1995 Form S-4).
10.18 --Agreement to Purchase and Sell Stock dated as of May 23, 1996,
among Metrol, the persons named therein as the "Shareholders" (the
"Metrol Shareholders"), Protection One Alarm Monitoring and POI
(incorporated by reference to Exhibit 2.1 to the Registration
Statement on Form S-3 (Registration No. 33-5849) originally filed by
POI on June 12, 1996 (the "June 1996 Form S-3")).
10.19 --Amendment No. 1 to Agreement dated as of June 28, 1996, among
Metrol, the Metrol Shareholders, Protection One Alarm Monitoring and
POI (incorporated by reference to Exhibit 2.2 to the June 1996 Form
S-3).
10.20 --Escrow Agreement dated May 31, 1996, among Metrol, the Metrol
Shareholders, Protection One Alarm Monitoring, POI and First
National Bank of Denver, N.A. as the Escrow Agent (incorporated by
reference to Exhibit 2.3 to the Current Report on Form 8-K filed by
POI and Protection One Alarm Monitoring dated June 7, 1996 (the
"June 1996 Form 8-K")).*
10.21 --Registration Rights Agreement dated as of June 28, 1996, among POI
and the Metrol Shareholders (incorporated by reference to Exhibit
99.1 to the June 1996 Form 8-K).
10.22 --Stock Option Agreement dated as of July 30, 1997, between Western
Resources and Protection One (incorporated by reference to Exhibit
10.1 to the July 1997 Form 8-K).
10.23 --Option and Voting Agreement dated as of July 30, 1997, between
Western Resources and Protection One (incorporated by reference to
Exhibit 10.2 to the July 1997 Form 8-K).
10.24 --Promissory Note dated as of March 2, 1998 between Westar Capital,
Inc., and Protection One (incorporated by reference to Exhibit 99.1
to the Current Report on Form 8-K filed by POI and Protection One
Alarm Monitoring dated March 17, 1998).
10.25 --Assignment, Assumption and Guaranty Agreement dated as of January
1, 1998 between Westar Capital, Inc. and Protection One Alarm
Monitoring (incorporated by reference to Exhibit 10.2 to the
Quarterly Report on Form 10-Q filed by POI and Protection One Alarm
Monitoring May 14, 1998).
II-5
10.26 --Credit Facility Agreement between Westar Capital, Inc., as Lender,
and Protection One Alarm Monitoring, as borrower, dated as of April
1, 1998 (incorporated by reference to Exhibit 99.1 to the Current
Report on Form 8-K filed by POI and Protection One Alarm Monitoring
May 15, 1998).
10.27 --Revolving Credit Agreement among Protection One Alarm Monitoring,
borrower, NationsBank, N.A., administrative agent, First Union
National Bank, syndication agent, Toronto Dominion (Texas), Inc.,
documentation agent, and Lenders named therein, dated December 21,
1998 (the "Revolving Credit Agreement") (incorporated by reference
to Exhibit 10.27 to the 1998 Form 10-K).
10.28 --First Amendment to the Revolving Credit Agreement, dated as of
February 26, 1999 (incorporated by reference to Exhibit 10.28 to the
1998 Form 10-K).
12.1 --Statement regarding Computation of Earnings to Fixed Charges
(incorporated by reference to Exhibit 12.1 to the 1998 Form 10-K).
16.1 --Letter from Coopers & Lybrand to the Securities and Exchange
Commission re: Change in Certifying Accountant (incorporated by
reference to Exhibit 16 to Amendment No. 1 to the Current Report on
Form 8-K filed by POI and Protection One Alarm Monitoring dated
February 5, 1998).
21.1 --Subsidiaries of POI and Protection One Alarm Monitoring
(incorporated by reference to Exhibit 21 to the 1998 Form 10-K).
23.1 --Consent of Arthur Andersen LLP.+
23.2 --Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1)++
99.1 --Promissory Note to Westar Capital, Inc. (incorporated by reference
to Exhibit 99.1 to the Current Report on Form 8-K filed by POI and
Protection One Alarm Monitoring on March 17, 1998).
99.2 --Registration Rights Agreement, dated December 21, 1998, among
Protection One Alarm Monitoring, POI and various subsidiary
guarantors and Morgan Stanley & Co. Incorporated, Chase Securities,
Inc.; First Union Capital Markets, NationsBanc Montgomery Securities
LLC and TD Securities (USA), Inc. (the "Placement Agents")
(incorporated by reference to Exhibit 99.2 to the 1998 Form 10-K).
99.3 --Placement Agreement, dated December 16, 1998, among Protection One
Alarm Monitoring, POI and various subsidiary guarantors and the
Placement Agents (incorporated by reference to Exhibit 99.3 to the
1998 Form 10-K).
- -------------------------
* Each Exhibit marked with an asterisk constitutes a management contract or
compensatory plan or arrangement required to be filed or incorporated by
reference as an Exhibit to this report under Item 14(c) of Form 10-K.
+ Filed herewith.
++ To be filed by amendment.
(b) During the last quarter of the fiscal year covered by this
Report, POI and Protection One Alarm Monitoring filed three Reports on Form 8-K.
The Current Report on Form 8-K dated November 2, 1998 reported the proposed
transaction with Lifeline Systems, Inc. in response to Item 5. A Current Report
on Form 8-K dated December 9, 1998 reported the reorganization of its executive
management structure and changes in some executive officers in response to Item
5. A Current Report on Form 8-K dated December 17, 1998 reported an unregistered
offering of debt securities in response to Item 5.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Co-Registrants hereby undertake:
II-6
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment of the prospectus) which, individually
or in the aggregate, represent a fundamental change in the information
shown in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the SEC under Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price found in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to the information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of the securities at the time shall be deemed to be the initial
bona fide offering of securities.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) The undersigned Co-Registrants hereby undertake to respond to
requests for information that is incorporated by reference into the
prospectus under Items 4, 10(b), 11, or 13 of this form, within one
business day of receipt of the request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed after the effective date of the
registration statement through the date of responding to the request.
(5) The undersigned Co-Registrants hereby undertake to supply by means
of a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-7
SIGNATURES
Under the requirements of the Securities Act of 1933, each
Co-Registrant certifies that it has reasonable grounds to believe that it meets
all requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Culver City, State of California, on April 27, 1999.
PROTECTION ONE ALARM MONITORING, INC. PROTECTION ONE, INC.
By: /s/ TOM RANKIN By: /s/ JOHN E. MACK III
---------------------------------- --------------------------
Tom Rankin John E. Mack III
President Chief Executive Officer
POWER OF ATTORNEY
Know all those by these presents, that each person whose signature
appears below constitutes and appoints each of John E. Mack III and Tony Somma,
or any of them, each acting alone, his true and lawful attorney-in-fact and
agent, with full Power of Substitution and Resubstitution, for such person and
in his name, place and stead, in any and all capacities, in connection with the
Registration Statement on Form S-4 of Protection One Alarm Monitoring, Inc. and
the Guarantors named therein under the Securities Act of 1933, as amended,
including, without limitation the generality of the foregoing, to sign the
Registration Statement in the name and on behalf of Protection One, Inc. and
Protection One Alarm Monitoring, Inc., or on behalf of the undersigned as a
director or officer of Protection One, Inc. and Protection One Alarm Monitoring,
Inc., and any and all amendments or supplements to the Registration Statement,
including any and all stickers and post-effective amendments to the Registration
Statement, and to sign any and all additional Registration Statements relating
to the same offering of Securities as the Registration Statement that are filed
under Rule 462 under the Securities Act of 1933, as amended, and to file the
same, with all exhibits thereto, and other documents in connection Therewith,
with the Securities and Exchange Commission and any applicable securities
exchange or securities self-regulatory body, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitutes or substitute, may lawfully
do or cause to be done by virtue hereof.
UNDER THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
Signature Title Date
--------- ----- ----
/s/ JOHN E. MACK III Chief Executive Officer April 27, 1999
- -------------------------------------- (Principal Executive Officer)
John E. Mack III
/s/ TONY SOMMA Acting Chief Financial Officer, Secretary April 27, 1999
- -------------------------------------- and Treasurer (Principal Financial and
Tony Somma Accounting Officer)
/s/ PETER C. BROWN Director April 27, 1999
- --------------------------------------
Peter C. Brown
/s/ ROBERT M. CHEFITZ Director April 27, 1999
- --------------------------------------
Robert M. Chefitz
/s/ HOWARD A. CHRISTENSEN Director April 27, 1999
- --------------------------------------
Howard A. Christensen
/s/ BEN M. ENIS Director April 27, 1999
- --------------------------------------
Ben M. Enis
/s/ JOSEPH J. GARDNER Director April 27, 1999
- --------------------------------------
Joseph J. Gardner
/s/ WILLIAM J. GREMP Director April 27, 1999
- --------------------------------------
William J. Gremp
/s/ STEVEN L. KITCHEN Director April 27, 1999
- --------------------------------------
Steven L. Kitchen
/s/ CARL M. KOUPAL, JR. Director April 27, 1999
- --------------------------------------
Carl M. Koupal, Jr.
/s/ DOUGLAS T. LAKE Chairman of the Board of Directors April 27, 1999
- --------------------------------------
Douglas T. Lake
/s/ JAMES M. MACKENZIE Director April 27, 1999
- --------------------------------------
James M. Mackenzie
/s/ JOHN C. NETTELS, JR. Director April 27, 1999
- --------------------------------------
John C. Nettels, Jr.
/s/ JAMES Q. WILSON Director April 27, 1999
- --------------------------------------
James Q. Wilson
SIGNATURES
Under the requirements of the Securities Act of 1933, each
Co-Registrant certifies that it has reasonable grounds to believe that it meets
all requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Culver City, State of California, on April 27, 1999.
NETWORK MULTI FAMILY SECURITY CORPORATION
By: /s/ STEVE V. WILLIAMS
-------------------------------------------
Steve V. Williams,
President
POWER OF ATTORNEY
Know all those by these presents, that each person whose signature
appears below constitutes and appoints each of John E. Mack III and Tony Somma,
or any of them, each acting alone, his true and lawful attorney-in-fact and
agent, with full Power of Substitution and Resubstitution, for such person and
in his name, place and stead, in any and all capacities, in connection with the
Registration Statement on Form S-4 of Protection One Alarm Monitoring, Inc. and
the Guarantors named therein under the Securities Act of 1933, as amended,
including, without limitation the generality of the foregoing, to sign the
Registration Statement in the name and on behalf of Network Multi Family
Security Corporation, or on behalf of the undersigned as a director or officer
of Network Multi Family Security Corporation, and any and all amendments or
supplements to the Registration Statement, including any and all stickers and
post-effective amendments to the Registration Statement, and to sign any and all
additional Registration Statements relating to the same offering of Securities
as the Registration Statement that are filed under Rule 462 under the Securities
Act of 1933, as amended, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission and any applicable securities exchange or securities self-regulatory
body, granting unto said attorneys-in-fact and agents, each acting alone, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
UNDER THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
Signature Title Date
--------- ----- ----
/s/ STEVE V. WILLIAMS President and Director April 27, 1999
- -------------------------------------- (Principal Executive Officer)
Steve V. Williams
/s/ PAT McCOLPIN Vice President and Chief Financial Officer April 27, 1999
- -------------------------------------- (Principal Financial and Accounting
Pat McColpin Officer)
/s/ JOHN E. MACK III Director April 27, 1999
- --------------------------------------
John E. Mack III
SIGNATURES
Under the requirements of the Securities Act of 1933, the Co-Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Culver City, State of California, on April 27, 1999.
COMSEC/NARRAGANSETT SECURITY, INC.
By: /s/ THOMAS K. RANKIN
--------------------------------------
Thomas K. Rankin
President
POWER OF ATTORNEY
Know all those by these presents, that each person whose signature
appears below constitutes and appoints each of John E. Mack III and Tony Somma,
or any of them, each acting alone, his true and lawful attorney-in-fact and
agent, with full Power of Substitution and Resubstitution, for such person and
in his name, place and stead, in any and all capacities, in connection with the
Registration Statement on Form S-4 of Protection One Alarm Monitoring, Inc. and
the Guarantors named therein under the Securities Act of 1933, as amended,
including, without limitation the generality of the foregoing, to sign the
Registration Statement in the name and on behalf of Comsec/Narragansett
Security, Inc. or on behalf of the undersigned as a director or officer of
Comsec/Narragansett Security, Inc., and any and all amendments or supplements to
the Registration Statement, including any and all stickers and post-effective
amendments to the Registration Statement, and to sign any and all additional
Registration Statements relating to the same offering of Securities as the
Registration Statement that are filed under Rule 462 under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
and any applicable securities exchange or securities self-regulatory body,
granting unto said attorneys-in-fact and agents, each acting alone, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
UNDER THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
Signature Title Date
--------- ----- ----
/s/ THOMAS K. RANKIN President April 27, 1999
- --------------------------------------
Thomas K. Rankin
/s/ TONY SOMMA Acting Chief Financial Officer, Secretary April 27, 1999
- -------------------------------------- and Treasurer
Tony Somma
/s/ JOHN E. MACK III Director April 27, 1999
- --------------------------------------
John E. Mack
/s/ STEVEN A. MILLSTEIN Director April 27, 1999
- --------------------------------------
Steven A. Millstein
SIGNATURES
Under the requirements of the Securities Act of 1933, the Co-Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Culver City, State of California, on April 27, 1999.
PROTECTION ONE INTERNATIONAL, INC.
By: /s/ JOHN E. MACK III
--------------------------------------
John E. Mack III
President
POWER OF ATTORNEY
Know all those by these presents, that each person whose signature
appears below constitutes and appoints each of John E. Mack III and Tony Somma,
or any of them, each acting alone, his true and lawful attorney-in-fact and
agent, with full Power of Substitution and Resubstitution, for such person and
in his name, place and stead, in any and all capacities, in connection with the
Registration Statement on Form S-4 of Protection One Alarm Monitoring, Inc. and
the Guarantors named therein under the Securities Act of 1933, as amended,
including, without limitation the generality of the foregoing, to sign the
Registration Statement in the name and on behalf of Protection One
International, Inc. or on behalf of the undersigned as a director or officer of
Protection One International, Inc., and any and all amendments or supplements to
the Registration Statement, including any and all stickers and post-effective
amendments to the Registration Statement, and to sign any and all additional
Registration Statements relating to the same offering of Securities as the
Registration Statement that are filed under Rule 462 under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
and any applicable securities exchange or securities self-regulatory body,
granting unto said attorneys-in-fact and agents, each acting alone, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
UNDER THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
Signature Title Date
--------- ----- ----
/s/ THOMAS K. RANKIN Vice President and Director April 27, 1999
- --------------------------------------
Thomas K. Rankin
/s/ TONY SOMMA Acting Chief Financial Officer, Secretary April 27, 1999
- -------------------------------------- and Treasurer
Tony Somma
/s/ JOHN E. MACK III Director April 27, 1999
- --------------------------------------
John E. Mack
SIGNATURES
Under the requirements of the Securities Act of 1933, the Co-Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Culver City, State of California, on April 27, 1999.
PROTECTION ONE INVESTMENTS, INC.
By: /s/ JOHN E. MACK III
--------------------------------------
John E. Mack III
President
POWER OF ATTORNEY
Know all those by these presents, that each person whose signature
appears below constitutes and appoints each of John E. Mack III and Tony Somma,
or any of them, each acting alone, his true and lawful attorney-in-fact and
agent, with full Power of Substitution and Resubstitution, for such person and
in his name, place and stead, in any and all capacities, in connection with the
Registration Statement on Form S-4 of Protection One Alarm Monitoring, Inc. and
the Guarantors named therein under the Securities Act of 1933, as amended,
including, without limitation the generality of the foregoing, to sign the
Registration Statement in the name and on behalf of Protection One Investments,
Inc. or on behalf of the undersigned as a director or officer of Protection One
Investments, Inc., and any and all amendments or supplements to the Registration
Statement, including any and all stickers and post-effective amendments to the
Registration Statement, and to sign any and all additional Registration
Statements relating to the same offering of Securities as the Registration
Statement that are filed under Rule 462 under the Securities Act of 1933, as
amended, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and any
applicable securities exchange or securities self-regulatory body, granting unto
said attorneys-in-fact and agents, each acting alone, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitutes or substitute, may lawfully
do or cause to be done by virtue hereof.
UNDER THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
Signature Title Date
--------- ----- ----
/s/ THOMAS K. RANKIN Vice President and Director April 27, 1999
- --------------------------------------
Thomas K. Rankin
/s/ TONY SOMMA Acting Chief Financial Officer, Secretary April 27, 1999
- --------------------------------------
Tony Somma and Treasurer
/s/ JOHN E. MACK III Director April 27, 1999
- --------------------------------------
John E. Mack III
EXHIBIT INDEX
-------------
EXHIBIT
NO. DESCRIPTION
--- -----------
2.1 --Contribution Agreement dated as of July 30, 1997 (the
"Contribution Agreement"), between Western Resources and Protection
One, Inc. ("POI") (incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K filed by POI(1) and Protection One Alarm
Monitoring, Inc. ("Monitoring")(2) dated July 30, 1997 (the "July
1997 Form 8-K")).
2.2 --Amendment No. 1 dated October 2, 1997, to the Contribution
Agreement (incorporated by reference to Exhibit 99.1 to the Current
Report of Form 8-K filed by POI and Protection One Alarm Monitoring
dated October 2, 1997).
2.3 --Assignment and Assumption Agreement (Centennial Security Holdings,
Inc.) dated as of November 24, 1997, among Western Resources, Westar
Capital, Inc. ("Westar Capital"), Westar Security, Inc. ("Westar
Security") and POI (incorporated by reference to Exhibit 2.3 to the
Current Report on Form 8-K filed by POI and Protection One Alarm
Monitoring dated November 24, 1997 (the "November 1997 Form 8-K")).
2.4 --Assignment and Assumption Agreement (Guardian International Inc.)
dated as of November 24, 1997, among Western Resources, Westar
Capital, Westar Security and POI (incorporated by reference to
Exhibit 2.4 to the November 1997 Form 8-K).
2.5 --Stock Purchase Agreement dated as of October 2, 1997, among
Centennial Security Holdings, Inc. ("Centennial"), the shareholders
of Centennial and Westar Capital (incorporated by reference to
Exhibit 2.5 to the November 1997 Form 8-K).
2.6 --Stock Subscription Agreement dated as of October 4, 1997, between
Guardian International, Inc. ("Guardian") and Westar Capital
(incorporated by reference to Exhibit 2.6 to the November 1997 Form
8-K).
2.7 --Asset Purchase Agreement among Multimedia Security Service, Inc.,
Multimedia Cablevisions, Inc. and Protection One Alarm Monitoring
dated January 15, 1998 (incorporated by reference to Exhibit 10.3 to
Quarterly Report on Form 10-Q filed by POI and Protection One Alarm
Monitoring on May 14, 1998).
2.8 --Conditional Purchase Agreement, dated as of August 6, 1998,
between certain directors and/or officers of Compagnie Europeenne de
Telesecuritie and Protection One Alarm Monitoring (incorporated by
reference to Exhibit 2.8 to the Annual Report on Form 10-K for the
year ended December 31, 1998 (the "1998 Form 10-K")).
2.9 --Stock Subscription Agreement, dated as of October 21, 1998,
between Guardian and Westar Security (incorporated by reference to
Exhibit 2.9 to the 1998 Form 10-K).
2.10 --Amended and Restated Agreement and Plan of Contribution and Merger
dated as of October 21, 1998 by and among POI, Protection
Acquisition Holding Corporation, P-1 Merger Sub, Inc. (Mass.), P-1
Merger Sub, Inc. (Del.) and Lifeline Systems, Inc. (incorporated by
reference to Exhibit 2.1 to Registration Statement on Form S-4 of
Protection One Acquisition Holding Corporation filed on December 10,
1998).
3.1 --Fifth Amended and Restated Certificate of Incorporation of POI, as
amended (incorporated by reference to Exhibit 3.1 to the Annual
Report on Form 10-K filed by POI and Protection One Alarm Monitoring
for the year ended September 30, 1997 (the "Fiscal 1997 Form
10-K")).
3.2 --Bylaws of POI (incorporated by reference to Exhibit 3.1 to the
Quarterly Report on Form 10-Q filed by POI and Protection One Alarm
Monitoring for the quarter ended March 31, 1996).
3.3 --Certificate of Incorporation of Protection One Alarm Monitoring,
as amended (incorporated by reference to Exhibit 3.2 to the
Registration Statement on Form S-3 (Registration Number 333-09401)
originally filed by Protection One Alarm Monitoring and, inter alia,
POI on August 1, 1996 (the "August 1996 Form S-3")).
3.4 --Bylaws of Protection One Alarm Monitoring (incorporated by
reference to Exhibit 3.2 to the Annual Report on Form 10-K filed by
POI and, inter alia, Protection One Alarm Monitoring for the year
ended September 30, 1994).
4.1 --Indenture dated as of May 17, 1995, among Protection One Alarm
Monitoring, as Issuer, POI, inter alia, as Guarantor, and The First
National Bank of Boston ("FNBB"), as trustee (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form S-4
(Registration No. 33-94684) originally filed by POI and, inter alia,
Protection One Alarm Monitoring on July 18, 1995 (the "1995 Form
S-4")).
4.2 --First Supplemental Indenture dated as of July 26, 1996, among
Protection One Alarm Monitoring, as Issuer, POI, inter alia, as
Guarantor and State Street Bank and Trust Company ("SSBTC") as
successor to FNBB as trustee (incorporated by reference to Exhibit
4.2 to the Annual Report on Form 10-K filed by POI and Protection
One Alarm Monitoring for the year ended September 30, 1996 (the
"Fiscal 1996 Form 10-K")).
4.3 --Second Supplemental Indenture dated as of October 28, 1996, among
Protection One Alarm Monitoring as Issuer, POI inter alia, as
Guarantor and SSBTC as trustee (incorporated by reference to Exhibit
4.3 to the Fiscal 1996 Form 10-K)).
4.4 --Subordinated Debt Shelf Indenture dated as of August 29, 1996,
among Protection One Alarm Monitoring as Issuer, POI as Guarantor
and SSBTC as trustee (incorporated by reference to Exhibit 4.3 to
the August 1996 Form S-3).
4.5 --Supplemental Indenture No. 1 dated as of September 20, 1996, among
Protection One Alarm Monitoring as Issuer, POI, inter alia, as
Guarantor and SSBTC as trustee (incorporated by reference to Exhibit
4.1 to the Current Report on Form 8-K filed by POI and Protection
One Alarm Monitoring and dated September 20, 1996 (the "September
1996 Form 8-K")).
4.6 --Supplemental Indenture No. 2 dated as of October 28, 1996, among
Protection One Alarm Monitoring as Issuer, POI, inter alia, as
Guarantor and SSBTC as trustee (incorporated by reference to Exhibit
4.6 to the Fiscal 1996 Form 10-K).
4.7 --Amended and Restated Credit Agreement dated as of June 7, 1996,
among Protection One Alarm Monitoring, Heller Financial, Inc.
("Heller Financial") as Agent and the financial institutions
signatory thereto (the "Lenders") (incorporated by reference to
Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by POI and
Protection One Alarm Monitoring for the quarter ended June 30,
1996).
4.8 --Consent and First Amendment to Credit Agreement dated as of
September 16, 1996, among Protection One Alarm Monitoring, Heller
Financial as Agent and the Lenders (incorporated by reference to
Exhibit 10.1 to the September 1996 Form 8-K).
4.9 --Second Amendment to Amended and Restated Credit Agreement dated as
of March 31, 1997, among Protection One Alarm Monitoring, Heller
Financial as Agent and the Lenders (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by POI and
Protection One Alarm Monitoring for the quarter ended March 31,
1997).
4.10 --Third Amendment to Amended and Restated Credit Agreement dated as
of September 30, 1997, among Protection One Alarm Monitoring, Heller
Financial as Agent and the Lenders (incorporated by reference to
Exhibit 4.10 to the Fiscal 1997 Form 10-K).
4.11 --Form of Revolving Note executed by Protection One Alarm Monitoring
in favor of each Lender under the Amended and Restated Credit
Agreement filed as Exhibit 4.7 (incorporated by reference to Exhibit
4.9 to the Fiscal 1996 Form 10-K).
4.12 --Amended and Restated Guaranty dated as of June 7, 1996, executed
by POI in favor of Heller Financial as Agent (incorporated by
reference to Exhibit 4.10 to the Fiscal 1996 Form 10-K).
4.13 --Amended and Restated Stock Pledge Agreement dated as of June 7,
1996, between POI and Heller Financial as Agent (incorporated by
reference to Exhibit 4.11 to the Fiscal 1996 Form 10-K).
4.14 --Amended and Restated Security Agreement dated as of June 7, 1996,
between Protection One Alarm Monitoring and Heller Financial as
Agent (incorporated by reference to Exhibit 4.12 to the Fiscal 1996
Form 10-K).
4.15 --Amended and Restated Continuing Security Interest and Conditional
Assignment of Patents, Trademarks, Copyrights and Licenses dated as
of June 7, 1996, between Protection One Alarm Monitoring and Heller
Financial as Agent (incorporated by reference to Exhibit 4.13 to the
Fiscal 1996 Form 10-K).
4.16 --Indenture, dated as of August 17, 1998, among Protection One Alarm
Monitoring, as issuer, POI as guarantor, and The Bank of New York,
as trustee (incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form 9-4 filed by POI and Protection One
Alarm Monitoring on September 22, 1998).
4.17 --Indenture, dated as of December 21, 1998, among Protection One
Alarm Monitoring, as issuer, POI, as guarantor, and The Bank of New
York, as trustee (incorporated by reference to Exhibit 4.17 to the
1998 Form 10-K).
5.1 --Legal opinion of Weil, Gotshal & Manges LLP as to the validity of
the registered notes.++
10.1 --Stock Purchase Warrant dated as of September 16, 1991, issued by
POI to Merita Bank, Ltd. (formerly Kansallis-Osake-Pankki)
(incorporated by reference to Exhibit 10.25 to the Quarterly Report
on Form 10-Q filed by POI and, inter alia, Protection One Alarm
Monitoring for the quarter ended March 31, 1994).
10.2 --Amended and Restated Stockholders' Agreement dated as of August
15, 1994, among POI and the stockholders of POI named therein
(incorporated by reference to Exhibit 10.42 to the Registration
Statement on Form S-1 (Registration No. 33-81292) originally filed
by POI on July 8, 1994).
10.3 --Warrant Agreement dated as of November 3, 1993, between Protection
One Alarm Monitoring and United States Trust Company of New York, as
Warrant Agent (incorporated by reference to Exhibit 4.3 to the
Registration Statement on Form S-4 (Registration Statement 33-73002)
originally filed by POI, Protection One Alarm Monitoring and certain
former subsidiaries of Protection One Alarm Monitoring on December
15, 1993 (the "1993 Form S-4")).
10.4 --Registration Rights Agreement dated as of November 3, 1993, among
Protection One Alarm Monitoring, POI, certain former subsidiaries of
Protection One Alarm Monitoring and Bear, Stearns & Co., Inc.
(incorporated by reference to Exhibit 4.4 to the 1993 Form S-4).
10.5 --Warrant Agreement dated as of May 17, 1995, between POI and The
First National Bank of Boston, as Warrant Agent (incorporated by
reference to Exhibit 10.40 to the 1995 Form S-4).
10.6 --Common Stock Registration Rights Agreement dated May 17, 1995,
among POI, Morgan Stanley & Co. Incorporated and Montgomery
Securities (incorporated by reference to Exhibit 10.41 to the 1995
Form S-4).
10.7 --Employment Agreement dated as of November 24, 1997, between
Protection One and James M. Mackenzie, Jr. (incorporated by
reference to Exhibit 10.4 to the November 1997 Form 8-K).*
10.8 --Employment Agreement dated as of November 24, 1997, between
Protection One and John W. Hesse (incorporated by reference to
Exhibit 10.5 to the November 1997 Form 8-K).*
10.9 --Employment Agreement dated as of November 24, 1997, between
Protection One and John E. Mack III (incorporated by reference to
Exhibit 10.6 to the November 1997 Form 8-K).*
10.10 --Employment Agreement dated as of November 24, 1997, between
Protection One and Thomas K. Rankin (incorporated by reference to
Exhibit 10.7 to the November 1997 Form 8-K).*
10.11 --Employment Agreement dated as of November 3, 1993, between
Protection One Alarm Monitoring and George A. Weinstock
(incorporated by reference to Exhibit 10.13 to the 1993 Form S-4).*
10.12 --Non-Competitive and Non-Solicitation Agreement dated as of
November 3, 1993, between Protection One Alarm Monitoring and George
A. Weinstock (incorporated by reference to Exhibit 10.14 to the 1993
Form S-4).*
10.13 --Consulting Agreement dated as of February 19, 1996, between POI
and Dr. Ben Enis (incorporated by reference to Exhibit 10.7 to the
Quarterly Report on Form 10-Q filed by POI and Protection One Alarm
Monitoring for the quarter ended June 30, 1996).*
10.14 --1994 Stock Option Plan of POI, as amended (incorporated by
reference to Exhibit 10.23 to the Fiscal 1996 Form 10-K).*
10.15 --1997 Long-Term Incentive Plan of POI (incorporated by reference to
Appendix F to POI's proxy statement dated November 7, 1997).*
10.16 --Notes Registration Rights Agreement dated as of May 17, 1995,
among POI, Protection One Alarm Monitoring, Morgan Stanley & Co.,
Incorporated and Montgomery Securities (incorporated by reference to
Exhibit 4.2 to the 1995 Form S-4).
10.17 --Agreement for Purchase and Sale of Assets, dated May 25, 1995,
between Alert Centre, Inc. and Protection One Alarm Monitoring
(incorporated by reference to Exhibit 4.2 to the 1995 Form S-4).
10.18 --Agreement to Purchase and Sell Stock dated as of May 23, 1996,
among Metrol, the persons named therein as the "Shareholders" (the
"Metrol Shareholders"), Protection One Alarm Monitoring and POI
(incorporated by reference to Exhibit 2.1 to the Registration
Statement on Form S-3 (Registration No. 33-5849) originally filed by
POI on June 12, 1996 (the "June 1996 Form S-3")).
10.19 --Amendment No. 1 to Agreement dated as of June 28, 1996, among
Metrol, the Metrol Shareholders, Protection One Alarm Monitoring and
POI (incorporated by reference to Exhibit 2.2 to the June 1996 Form
S-3).
10.20 --Escrow Agreement dated May 31, 1996, among Metrol, the Metrol
Shareholders, Protection One Alarm Monitoring, POI and First
National Bank of Denver, N.A. as the Escrow Agent (incorporated by
reference to Exhibit 2.3 to the Current Report on Form 8-K filed by
POI and Protection One Alarm Monitoring dated June 7, 1996 (the
"June 1996 Form 8-K")).*
10.21 --Registration Rights Agreement dated as of June 28, 1996, among POI
and the Metrol Shareholders (incorporated by reference to Exhibit
99.1 to the June 1996 Form 8-K).
10.22 --Stock Option Agreement dated as of July 30, 1997, between Western
Resources and Protection One (incorporated by reference to Exhibit
10.1 to the July 1997 Form 8-K).
10.23 --Option and Voting Agreement dated as of July 30, 1997, between
Western Resources and Protection One (incorporated by reference to
Exhibit 10.2 to the July 1997 Form 8-K).
10.24 --Promissory Note dated as of March 2, 1998 between Westar Capital,
Inc., and Protection One (incorporated by reference to Exhibit 99.1
to the Current Report on Form 8-K filed by POI and Protection One
Alarm Monitoring dated March 17, 1998).
10.25 --Assignment, Assumption and Guaranty Agreement dated as of January
1, 1998 between Westar Capital, Inc. and Protection One Alarm
Monitoring (incorporated by reference to Exhibit 10.2 to the
Quarterly Report on Form 10-Q filed by POI and Protection One Alarm
Monitoring May 14, 1998).
10.26 --Credit Facility Agreement between Westar Capital, Inc., as Lender,
and Protection One Alarm Monitoring, as borrower, dated as of April
1, 1998 (incorporated by reference to Exhibit 99.1 to the Current
Report on Form 8-K filed by POI and Protection One Alarm Monitoring
May 15, 1998).
10.27 --Revolving Credit Agreement among Protection One Alarm Monitoring,
borrower, NationsBank, N.A., administrative agent, First Union
National Bank, syndication agent, Toronto Dominion (Texas), Inc.,
documentation agent, and Lenders named therein, dated December 21,
1998 (the "Revolving Credit Agreement") (incorporated by reference
to Exhibit 10.27 to the 1998 Form 10-K).
10.28 --First Amendment to the Revolving Credit Agreement, dated as of
February 26, 1999 (incorporated by reference to Exhibit 10.28 to the
1998 Form 10-K).
12.1 --Statement regarding Computation of Earnings to Fixed Charges
(incorporated by reference to Exhibit 12.1 to the 1998 Form 10-K).
16.1 --Letter from Coopers & Lybrand to the Securities and Exchange
Commission re: Change in Certifying Accountant (incorporated by
reference to Exhibit 16 to Amendment No. 1 to the Current Report on
Form 8-K filed by POI and Protection One Alarm Monitoring dated
February 5, 1998).
21.1 --Subsidiaries of POI and Protection One Alarm Monitoring
(incorporated by reference to Exhibit 21 to the 1998 Form 10-K).
23.1 --Consent of Arthur Andersen LLP.+
23.2 --Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1)++
99.1 --Promissory Note to Westar Capital, Inc. (incorporated by reference
to Exhibit 99.1 to the Current Report on Form 8-K filed by POI and
Protection One Alarm Monitoring on March 17, 1998).
99.2 --Registration Rights Agreement, dated December 21, 1998, among
Protection One Alarm Monitoring, POI and various subsidiary
guarantors and Morgan Stanley & Co. Incorporated, Chase Securities,
Inc.; First Union Capital Markets, NationsBanc Montgomery Securities
LLC and TD Securities (USA), Inc. (the "Placement Agents")
(incorporated by reference to Exhibit 99.2 to the 1998 Form 10-K).
99.3 --Placement Agreement, dated December 16, 1998, among Protection One
Alarm Monitoring, POI and various subsidiary guarantors and the
Placement Agents (incorporated by reference to Exhibit 99.3 to the
1998 Form 10-K).
- -------------------------
* Each Exhibit marked with an asterisk constitutes a management contract or
compensatory plan or arrangement required to be filed or incorporated by
reference as an Exhibit to this report under Item 14(c) of Form 10-K.
+ Filed herewith.
++ To be filed by amendment.