AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 2001
Registration No. 333-77295
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT NO. 2
TO
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 (I.R.S. Employer (State or Other (I.R.S. Employer
of Identification No.) Jurisdiction of Identification No.)
Incorporation or Incorporation or
Organization) Organization)
7382
(Primary Standard Industrial Classification Code Number)
For Co-Registrants, please see "Table of Co-Registrants"
Anthony D. Somma
Chief Financial Officer,
Secretary and Treasurer
PROTECTION ONE, INC.
818 S. Kansas Avenue
Topeka, Kansas 66612
(785) 575-1707
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrants' Principal Executive Office and Name, Address, Including
Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies To:
Gary W. Wolf, Esq.
Jonathan I. Mark, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
(212) 701-3000
Approximate date of commencement of proposed issuance of the securities 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
pursuant to 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. / /
--------------------
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 ACCORDANCE 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 PURSUANT TO SECTION 8(a), MAY
DETERMINE.
================================================================================
TABLE OF CO-REGISTRANTS
STATE OR OTHER PRIMARY STANDARD
JURISDICTION OF INDUSTRIAL I.R.S. EMPLOYER
INCORPORATION OR CLASSIFICATION IDENTIFICATION
NAME ORGANIZATION CODE NUMBER NUMBER
Network Multi-Family Security Corporation... Delaware 7382 75-2050133
PROSPECTUS
$238,240,000
PROTECTION ONE ALARM MONITORING, INC.
(GUARANTEED BY PROTECTION ONE, INC. AND NETWORK MULTI-FAMILY
SECURITY CORPORATION)
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 May 29,
2001, 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.
---------------------
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 or 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 12, WHICH DESCRIBES INFORMATION YOU SHOULD CONSIDER BEFORE PARTICIPATING
IN THE EXCHANGE OFFER.
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April 27, 2001
TABLE OF CONTENTS
PAGE
Forward-Looking Statements..................................................ii
Prospectus Summary...........................................................1
Risk Factors................................................................12
Ratio of Earnings to Fixed Charges..........................................15
Use of Proceeds.............................................................15
The Exchange Offer..........................................................16
Description of the Registered Notes.........................................25
Book-Entry; Delivery and Form...............................................68
Plan of Distribution........................................................71
Material Federal Income Tax Consequences....................................72
Legal Matters...............................................................72
Experts.....................................................................72
Where You Can Find More Information.........................................72
Information Incorporated by Reference.......................................73
Appendix A-- Form 10-K for the fiscal year ended December 31, 2000 of Protection
One Alarm Monitoring, Inc. and Protection One, Inc.
This prospectus is accompanied by a copy of our and Protection One, Inc.'s
annual report on Form 10-K for the fiscal year ended December 31, 2000 attached
hereto as Appendix A. We are also incorporating the accompanying Form 10-K (but
not the exhibits to the Form 10-K unless indicated otherwise) in this prospectus
by reference. Supplements and amendments to the Form 10-K and reports on Form
10-Q subsequent to the Form 10-K that we file with the SEC prior to the
expiration date (but not the exhibits thereto) will also be furnished to you and
incorporated in this prospectus by reference.
The SEC allows this prospectus to incorporate by reference other important
business and financial information about our company which is not presented in
or delivered with this prospectus. Documents relating to this information,
excluding exhibits to those documents unless they are specifically incorporated
by reference in this prospectus, are available without charge upon request to
the Secretary, Protection One Alarm Monitoring, Inc., 818 S. Kansas Avenue,
Topeka, Kansas 66612. Telephone requests may be directed to (785) 575-1707. Our
principal executive offices are located at 818 S. Kansas Avenue, Topeka, Kansas
66612. Our telephone number is (785) 575-1707. In order to obtain delivery of
these documents, holders of notes must request this information no later than
May 21, 2001.
Our principal executive offices are located at 818 S. Kansas Avenue,
Topeka, Kansas 66612. Our telephone number is (785) 575-1707.
i
FOR PENNSYLVANIA RESIDENTS ONLY:
NEW NOTES OFFERED IN THIS EXCHANGE OFFER TO PENNSYLVANIA RESIDENTS MAY ONLY
BE EXCHANGED FOR ORIGINAL NOTES HELD BY PENNSYLVANIA RESIDENTS WHO ARE: (1)
"QUALIFIED INSTITUTIONAL BUYERS" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") ("QIBs")); (2) INSTITUTIONAL
"ACCREDITED INVESTORS" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT); AND (3) INSTITUTIONAL INVESTORS AS DEFINED BY ss. 102(k) OF THE
PENNSYLVANIA SECURITIES ACT OF 1972 AND RULE 102.111 OF THE PENNSYLVANIA CODE,
AS AMENDED.
FORWARD-LOOKING STATEMENTS
This prospectus and the accompanying Form 10-K attached hereto as Appendix
A and the other materials incorporated in this prospectus 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 in this
prospectus and the accompanying Form 10-K and the other materials incorporated
in this prospectus by reference 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 those in the forward-looking statements. Important factors that
could cause actual results to differ materially from our expectations include,
among others, the factors discussed below under "Risk Factors" in this
prospectus and the accompanying Form 10-K. The forward-looking statements in
this prospectus and the accompanying Form 10-K and the other materials
incorporated in this prospectus by reference are made only as of the date of
this prospectus, and we undertake no obligation to publicly update these
forward-looking statements to reflect subsequent events or circumstances.
ii
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 other subsidiaries or its predecessors. The term the
"notes" refers to either or both of the outstanding notes and/or the registered
notes, as the context requires.
On December 21, 1998, we completed the private offering of $350,000,000
principal amount of 8 1/8% Senior Subordinated Notes due 2009. As of the date of
this prospectus, we had acquired and retired notes with an aggregate principal
value of $111,760,000, leaving an aggregate principal amount of $238,240,000 of
the notes outstanding as of that date. These outstanding notes are guaranteed by
our parent, Protection One, Inc., and Network Multi-Family Security Corporation.
We and these guarantors entered into a registration rights agreement with the
placement agents 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. We have been obligated to pay
additional interest of 0.50% per year on the notes because we did not consummate
the exchange offer by that time, and the interest rate on the notes will remain
at the increased rate until the exchange offer is consummated. As a holder of
outstanding notes, you are entitled to exchange in the exchange offer your
unregistered outstanding notes for a new series of notes which we have
registered under the Securities Act of 1933, as amended, and which have
substantially identical terms. After consummation of the exchange offer, the
interest rate on any untendered outstanding notes will return to 8 1/8% per
year, and the interest rate on the registered notes will also be 8 1/8% per
year. The exchange offer will be considered to be consummated when we, as soon
as practicable after 5 p.m. New York City time on May 29, 2001, unless we decide
to extend this expiration date,
o accept for exchange your outstanding notes tendered and not validly
withdrawn pursuant to the exchange offer and
o deliver to the trustee for cancellation all your outstanding notes accepted
for exchange and issue to you registered notes equal in principal amount to
the principal amount of the outstanding notes surrendered by you.
You should read the discussion under the heading "Summary of Material 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 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 Material
Terms of the Exchange Offer" and "The Exchange Offer" for further information
regarding the exchange offer and the resale of notes.
Western Resources Merger
On November 9, 2000, Western Resources, Inc., announced that it had entered
into an agreement with Public Service Company of New Mexico providing for the
purchase of Western Resources' electric utility business in a stock-for-stock
transaction. Immediately prior to the consummation of this transaction, Western
Resources will split off its then interest in Westar Industries, Inc. to its
shareholders. Westar Industries' businesses consist of the approximate 85%
ownership interest in Protection One, Inc., an approximate 45% ownership
interest in ONEOK Inc., a Tulsa-based natural gas company, a 100% ownership
interest in Protection One Europe (formerly the Europe segment of Protection
One, Inc.), and other investments. We can give no assurances as to whether or
when any of these transactions may occur.
2
Summary of Material Terms of the Exchange Offer
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 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 8 1/8% 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. Unless we terminate the
exchange offer, all outstanding notes that are validly
tendered and not validly withdrawn will be exchanged.
As of the date of this prospectus, there is
$238,240,000 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 to be 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 you are acquiring the registered notes issued 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, Protection
One, Inc. or any of its subsidiaries, as that term is
defined in Rule 405 of the Se-
3
curities Act.
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 is 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, Protection One, Inc. or any of its
subsidiaries.
Record Date........................................... We mailed this prospectus together with the
accompanying Form 10-K attached hereto as Appendix A
and the related exchange offer documents to registered
holders of outstanding notes on April 30, 2001. We
will mail any amendments and supplements (including
any reports on Form 10-Q) incorporated by reference
herein to these holders.
Expiration Date....................................... The exchange offer will expire at 5:00 p.m., New York
City time, on May 29, 2001, unless we decide to extend
this expiration date.
4
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;
o any SEC rule, regulation or interpretation materially
impairs the exchange offer; or
o as otherwise described under "The Exchange Offer--
Expiration Date; Extensions; Amendments" below.
We may waive any or all of these conditions. At this time,
there are no adverse proceedings, actions or developments
pending or, to our knowledge, threatened, and no governmental
approvals are necessary to complete the exchange offer.
Procedures for Tendering If you wish to tender your outstanding notes for
Outstanding Notes................................. 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 computer generated message transmitted by means of
the Automated Tender Offer Program, or ATOP, system
operated by The Depository Trust Company, or DTC, 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; or
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.
If either of these procedures cannot be satisfied on a timely
basis, then you should comply with the guaranteed delivery
procedures described below.
5
By executing the letter of transmittal, you will be representing,
among other things, that:
o you are acquiring the registered notes issued in the
exchange offer in the ordinary course of your
business;
o you are not participating, do not intend to
participate in 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, Protection
One, Inc. or any of its subsidiaries.
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 are a beneficial owner and 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 possible to complete
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, then
prior to the expiration date you may tender your
outstanding notes under the procedures described in
this prospectus under the heading "The Exchange
Offer-- Guaranteed Delivery Procedures."
Untendered Outstanding Notes.......................... If you are eligible to participate in the exchange
offer and you do not tender your outstanding
6
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 applicable state
securities laws or pursuant to an exemption from the
Securities Act and these securities laws. We do not
currently plan to register the outstanding notes under
the Securities Act after the completion of the
exchange offer, except in some circumstances.
Accordingly, the liquidity of the market for the
outstanding notes could be adversely affected.
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.
Acceptance of Outstanding Notes and Delivery
of Registered Notes....................... Subject to certain conditions, we will accept any and
all outstanding notes that are properly tendered in
the exchange offer and not withdrawn prior to 5:00
p.m., New York City time, on the expiration date. The
exchange offer will be considered consummated when we,
as soon as practicable after the expiration date,
accept for exchange the outstanding notes tendered,
deliver them to the trustee for cancellation and issue
the registered notes. We will deliver the registered
notes as soon as practicable after 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.
Fees and Expenses..................................... 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 in the section "The Exchange Offer" for more
detailed information concerning the exchange offer.
7
Summary of Material Terms of the Registered Notes
We will pay interest on the registered notes in the same manner as the
outstanding notes, except that after consummation of the exchange offer the
interest rate on any untendered notes will return to 8 1/8% per year, and the
interest rate on the registered notes will also be 8 1/8% per year. 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.
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 Network Multi-Family Security
Corporation, a wholly owned domestic subsidiary of
Protection One, Inc.
Securities Offered.................................... $238,240,000 aggregate principal amount of Series B
8 1/8% Senior Subordinated Notes due 2009, which we
have registered under the Securities Act.
Maturity Date......................................... June 15, 2009.
Interest Payment Dates and Record Dates............... January 15 and July 15 of each year, commencing on
July 15, 2001. Interest will be paid to the holders
of record of the notes on the immediately preceding
January 1 and July 1.
Amount of Interest to be Paid on the Registered Notes Interest on the registered notes will be paid at the
for the First Payment Period...................... rate of 8 5/8% per annum from the most recent date to
which interest has
been paid on the
outstanding notes
through the date of
the consummation of
the exchange offer
and at the rate of 8
1/8% per annum from
and after that date.
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 upon the happening of
certain events as described under "Description of the
Registered Notes-- Change of Control" below, we will
be required to offer to purchase the registered 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
owner-
8
ship to make any required debt repayment,
including repurchases of your registered notes.
Guarantees of the Registered Notes.................... Our parent and our domestic subsidiary on the issue
date, as well as certain future domestic subsidiaries
that guarantee our credit facility or certain other
indebtedness, will guarantee the registered notes on
an unsecured senior subordinated basis. Each
guarantor will guarantee the entire principal amount
of your registered notes. These guarantees will rank
junior in right of payment to the guarantors' senior
indebtedness, equal in right of payment to any of the
guarantors' senior subordinated indebtedness and 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.
As of March 31, 2001, the guarantors had no
indebtedness outstanding that ranked senior to the
guarantors' guarantees of the registered notes, other
than in respect of our credit facility.
Ranking............................................... The registered notes:
o are not secured by any of our assets;
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.
As of March 31, 2001, the notes ranked junior to $339.65
million of our senior indebtedness.
Key Covenants......................................... The indenture under which we will issue the registered
notes contains covenants for your benefit which
restrict our ability or the ability of the guarantors
to, among other things:
o borrow additional money;
o pay dividends on or redeem capital stock, or make
other restricted payments or invest-
9
ments;
o sell assets; or
o merge or consolidate with any other person. However,
these limitations have a number of important
qualifications and exceptions. If the registered
notes attain Investment Grade Status (as defined in
this prospectus), 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 DTC. The registered notes
will be registered in the name of a nominee of DTC, as
the depositary. DTC 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 are not aware of any public market for the
outstanding notes and we cannot assure you that
a public market for the registered notes will
develop in the future or, if developed, will
continue. 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.
Please review the information in the section "Description of the Registered
Notes" for more detailed information concerning the registered notes.
10
The Company
Overview
Protection One is a leading provider of property monitoring services,
providing electronic monitoring and maintenance of alarm systems to over 1.3
million customers in North America as of December 31, 2000. Protection One's
revenues are generated primarily from recurring monthly payments for monitoring
and maintaining the alarm systems that are installed in Protection One's
customers' homes and businesses. Protection One provides services to residential
(both single family and multifamily residences), commercial and wholesale
customers. At December 31, 2000, Protection One's customer base composition was
as follows:
Percentage of Total
Market Segment
Single family and commercial 67%
Multifamily/Apartment 22
Wholesale 11
--
Total 100%
====
Protection One is divided into two business segments:
o Protection One North America generated approximately $364.5 million,
or 84.4%, of Protection One's revenues in 2000 and is comprised of
Protection One Alarm Monitoring, Protection One's core alarm
monitoring business.
o Network Multifamily generated approximately $39.4 million, or 9.1%, of
Protection One's revenues in 2000 and is comprised of Protection One's
alarm monitoring business servicing apartments, condominiums and other
multifamily dwellings.
Recent Development
Richard Ginsburg joined us and Protection One as a director and as our and
Protection One's Chief Executive Officer in April 2001. He was President and
Chief Executive Officer from August 1996 to April 2001, and, prior to that, Vice
President of Guardian International, Inc., a security monitoring company. He is
a director of Guardian in which Protection One Investments, Inc., a wholly owned
subsidiary of Westar Industries, owns preferred stock representing approximately
29% of Guardian equity securities.
Annette M. Beck will continue to serve as our and Protection One's
President.
11
RISK FACTORS
Ownership of the 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 the accompanying Form 10-K attached
hereto as Appendix A and in any other filings with the SEC incorporated by
reference in this prospectus. These cautionary statements are intended to
highlight certain factors that may affect our financial condition and results of
operations and are not meant to be an exhaustive discussion of risks that apply
to public companies with broad operations, such as us. Like other businesses, we
are susceptible to macroeconomic downturns in the United States or abroad that
may affect the general economic climate and our performance or that of our
customers. Similarly, the price of our securities is subject to volatility due
to fluctuations in general market conditions, differences in our results of
operations from estimates and projections generated by the investment community
and other factors beyond our control.
Risk Relating to the Exchange Offer
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 in 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, which restrict
transfers of the notes to those which may be made 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 any outstanding notes under the Securities
Act after completion of the exchange offer. 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, in
the exchange offer in exchange for your outstanding notes may be offered for
resale resold, or otherwise transferred by you, unless you are an "affiliate" of
our company, Protection One, Inc. or any of its subsidiaries 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:
o you acquire your registered notes in the ordinary course of your
business and
o unless you are a broker-dealer, you are not participating, do not
intend to participate and you have no arrangement or understanding
with any person to participate in the distribution of your registered
notes.
12
The SEC has not, however, considered this 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 this exchange offer.
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 an affiliate of our company, Protection One, Inc. or
any of its subsidiaries or are engaged in or intend to engage in, or have any
arrangement or understanding with any person to participate in, 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.
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 meeting the
requirements of the Securities Act 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 at 101% of their principal amount, plus accrued interest. Our credit
facility prohibits us from purchasing the notes and other debt that ranks junior
to the credit facility. In addition, any of our future debt agreements may
contain similar restrictions and provisions. The ability to pay cash to the
holders of the registered notes or a repurchase will be limited by our then
existing financial resources. Accordingly, it is possible that we may not have
sufficient funds at that time to make this repurchase of registered notes or
that restrictions in our credit facility will not allow those requirements. 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
13
of 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.
We are not aware of any public market for the outstanding notes and we
cannot assure you that a public market for the registered notes will develop in
the future or, if developed, will continue. 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.
Risks Relating to Protection One
We are subject to variety of business-related risks, including the
following:
o we have had a history of losses which are likely to continue;
o the impact of recently proposed accounting changes relating to
goodwill could be significant; o the impact of class action litigation
may be material; o the competitive market for the acquisition and
creation of accounts may affect our future profitability;
o we may experience difficulty integrating businesses we acquire;
o we will need additional funding to finance our future growth;
o we have a substantial amount of debt, which could constrain our
growth;
o we will need to refinance our credit facility;
o our debt agreements impose operational restrictions on us;
o we lose some of our customers over time;
o our customer acquisition strategies may not be successful;
o declines in new construction of multi-family dwellings may affect our
sales in this marketplace;
o Westar Industries is our principal stockholder and senior lender;
o we obtain administrative services from Western Resources; and
o we have deferred tax assets we may not utilize.
See "Item 1. Business--Risk Factors" in the accompanying Form 10-K for
information concerning these note factors.
14
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our unaudited consolidated ratios of
earnings to fixed charges on a historical basis.
Protection One Predecessor
------------------------------------------------------------- -----------
Year Ended 53 Weeks Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 30,
2000 1999 1998 1997 1996 1996
---- ---- ---- ---- ---- ----
Ratio of earnings to
fixed charges (coverage
deficiency) (1.36)x (0.22)x 0.59x (1.11)x (63.40)x 0.28x
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 $142.3 million, $106.2 million, $23.1
million, $70.7 million and $1.0 million for Protection One, Inc. and its
consolidated subsidiaries during the years ended December 31, 2000, 1999, 1998,
1997 and 1996, respectively, and by approximately $7.8 million for Protection
One, Inc.'s accounting predecessor, Westinghouse Security, during the 53 weeks
ended December 30, 1996.
USE OF PROCEEDS
There will be no 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 canceled.
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
the revolving credit facility we had at the time, and for general corporate
purposes and working capital. That revolving credit facility bore 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 Industries, which borrowings had been used to refinance promissory notes
used to fund various acquisitions and other growth in 1998.
15
THE EXCHANGE OFFER
Purpose and Effect
On December 21, 1998, we sold the outstanding notes to the placement
agents. In connection with the sale of the outstanding notes, we entered into a
registration rights agreement with the placement agents, 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 because this
exchange offer was not consummated on or before June 21, 1999, the annual
interest rate borne by the outstanding notes was increased 0.50% per year and
will remain at this increased rate until the exchange offer is consummated.
Except as discussed below, after the consummation of the exchange offer we will
have no further obligations to register your notes. The exchange offer will be
considered to be consummated when we, as soon as practicable after 5 p.m. New
York City time on May 29, 2001, unless we decide to extend this expiration date,
o accept for exchange your outstanding notes tendered and not validly
withdrawn pursuant to the exchange offer and
o deliver to the trustee for cancellation all your outstanding notes
accepted for exchange and issue to you registered notes equal in
principal amount to the principal amount of the outstanding notes
surrendered by you.
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 the
fiscal year ended December 31, 1998, is incorporated by reference as an exhibit
to the registration statement of which this prospectus is a part and is
available from us upon request. 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 acting on your behalf is engaging in
or intends to engage in a distribution of your registered notes;
o neither you nor any other person acting on your behalf has an
arrangement or understanding with any person to participate in the
distribution of the registered notes;
o neither you nor any other person acting on your behalf is an
"affiliate" of our company, Protection One, Inc. or any or its
subsidiaries, as defined under Rule 405 of the Securities Act; and
o if you or any other person acting on your behalf is a broker-dealer,
you will receive registered notes for your own account and your
registered notes were acquired as a result of
16
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 agreement, 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
applicable law or applicable interpretations of the staff of the SEC;
o we did not consummate the exchange offer by June 21, 1999;
o you provide us before the 20th day following the consummation of the
exchange offer an opinion of counsel that
-- you are prohibited by applicable law or applicable interpretation
of the staff of the SEC from participating in the exchange offer
or
-- you may not resell registered notes to the public without
delivering a prospectus and that this prospectus is not
appropriate or available for your resales; 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.
If you make the representations that we discuss above and participate in
the exchange offer, we believe that you may offer, sell or 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 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 consummation of the exchange offer, the
interest rate paid on the outstanding notes not exchanged will revert to 8 1/8%
and, 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
17
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; 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 accompanying Form 10-K attached hereto
as Appendix A and 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, as
amended, 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, which will occur as soon as
practicable after the expiration date. 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 will return the
certificates, if any, without expense, to you as promptly as practicable after
the expiration date. Certificates, if any, for registered notes will likewise be
sent to you as promptly as practicable following our acceptance of the tendered
outstanding notes following 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 May 29,
2001, 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.
18
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 have not 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.
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 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 will 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 applicable 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 will
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
19
o a Book-Entry Confirmation of your outstanding notes into the exchange
agent's account at the Book-Entry Transfer Facility or certificates
for your outstanding notes,
o with respect to DTC and its participants, electronic instructions of
the holder agreeing to be bound by the letter of transmittal or a
properly completed and duly executed letter of transmittal and
o all other required documents.
In the case of outstanding notes tendered 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. 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. 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 will 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 interpretation
of the staff of the SEC or any order of any governmental agency or court of
competent jurisdiction.
Procedures for Tendering Your Outstanding Notes
Only you may tender your outstanding notes in the exchange offer. Except as
stated under "-- Book-Entry Transfer," to tender your outstanding notes 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 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 DTC (the "Book-Entry
Transfer Facility") under the procedure for book-entry transfer
described below before the expiration date; or
o the exchange agent must receive certificates for your outstanding
notes and the letter of transmittal before the expiration date; or
20
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 valid agent's message through DTC's Automatic Tender Offer
Program, or ATOP, system or a letter of transmittal and other required documents
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 your outstanding notes, 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.
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.
DTC's ATOP is the only method of processing the exchange offer through DTC.
To accept the exchange offer through ATOP, participants in DTC must send
electronic instructions to DTC
21
through DTC's communication system instead of sending a signed, hard copy letter
of transmittal. DTC is obligated to communicate those electronic instructions to
the exchange agent. To tender your outstanding notes through ATOP, the
electronic instructions sent to DTC and transmitted by DTC 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.
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.
Guaranteed Delivery Procedures
If you are a registered holder of outstanding notes and desire to tender
your outstanding notes, and the procedure for book-entry transfer cannot be
completed on a timely basis, 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, you may tender
your outstanding notes if:
o the tender is made through an Eligible Institution;
o before the expiration date, the exchange agent receives 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 a Book-Entry Confirmation or the certificates for all physically
tendered outstanding notes, in proper form for transfer, and all other
documents required by the applicable letter of transmittal are
received by the exchange agent within three New York Stock Exchange
trading days after the date of execution of the notice of guaranteed
delivery; and
o the notice of guaranteed delivery states 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 NYSE trading
days after the date of execution of the notice of guaranteed delivery,
a Book-Entry Confirmation or the certificates for all physically
tendered outstanding notes, in proper form for transfer, and any other
documents required by the applicable letter of transmittal will be
deposited by the Eligible Institution with the exchange agent.
22
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, an electronic ATOP transmission or,
for non-DTC participants, written 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, if any, 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,
including time of receipt, of your notice, and our determination will be final
and binding on all parties. 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 for any reason without cost to 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.
23
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 and accompanying Form 10-K or a letter of transmittal should be
directed to the exchange agent addressed as follows:
By Registered or Certified Mail: By Facsimile By Hand or Overnight Delivery:
(Eligible Institutions Only):
The Bank of New York (212) 815-6339 Before 4:30 p.m.
101 Barclay Street Attn: Reorganization Section The Bank of New York
Floor 7 East William Buckley 101 Barclay Street
New York, New York 10286 Floor 7 East
Attn: Reorganization Section For Information or Corporate Trust Services Window
William Buckley Confirmation by Telephone: Attn: Reorganization Section
(212) 815-5788 (212) 815-5788 William Buckley
(212) 815-5788
(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 $0.25 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, you will
be responsible for the payment of any transfer tax owed.
24
DESCRIPTION OF THE REGISTERED NOTES
General
The notes were issued under an indenture among Protection One, Inc.,
Protection One Alarm Monitoring and Network Multi-Family Security Corporation
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 fiscal year ended December
31, 1998, is incorporated by reference as an exhibit to the registration
statement of which this prospectus is a part and is available from us upon
request. See "Where You Can Find More Information." 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 in this
section and not otherwise defined 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" mean Protection One Alarm
Monitoring, Inc., excluding, unless the context otherwise requires or
as otherwise expressly stated, its Subsidiaries, and
o "Protection One, Inc." mean 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.
Protection One, Inc. will guarantee the registered notes on a senior
subordinated basis.
Principal of, premium, if any, and interest on the notes will be paid and
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 $1,000. 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
25
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 found in the indenture.
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 DTC. The registered notes will be registered
in the name of a nominee of DTC, as the depositary. DTC and its participants
will maintain records in book-entry form showing beneficial interests in the
registered notes and transfers of these interests.
Principal, Maturity and Interest
The notes are unsecured senior subordinated obligations of Protection One
Alarm Monitoring, limited to $350 million aggregate principal amount, of which
$238,240,000 million aggregate principal amount was outstanding as of the date
of this prospectus, and mature on January 15, 2009 at their principal amount.
Interest on the notes will be payable in cash semi-annually on each January 15
and July 15 (interest payments on the outstanding notes commenced on 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 on the outstanding notes,
except that, if there is no existing default in the payment of interest and the
note is authenticated between January 1 and January 15 or July 1 and July 15,
then interest will accrue from January 15 or July 15, respectively. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
Amount of Interest to be Paid on the Registered Notes for the First Payment
Period
Interest on the registered notes will be paid at the rate of 8 5/8% per
annum from the most recent date to which interest has been paid on the
outstanding notes through the date of the consummation of the exchange offer and
at the rate of 8 1/8% per annum from and after that date.
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,
26
plus, in each case, accrued and unpaid interest 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
"-- Change of Control" and "-- Covenants -- Limitation on Incurrence of
Additional Indebtedness," "-- Limitation on Restricted Payments," "-- Limitation
on Asset Sales" and "-- Guarantees" will be terminated if at any time
(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 $1,000, 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 (a "Change of
Control Payment"). 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
27
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 $1,000. 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.
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 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 Protection One, Inc. or its Restricted Subsidiaries,
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.
28
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 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 the 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, if any, and interest on the
notes, and all other Obligations with respect to the notes, is subordinated in
right of payment, to the extent set forth in the indenture, to the payment in
full in cash of all existing and future Senior Indebtedness of Protection One
Alarm Monitoring; provided, however, 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 are senior subordinated debt of Protection One Alarm Monitoring. As of
March 31, 2001, the notes ranked junior to $339.65 million of Protection One
Alarm Monitoring's senior indebtedness. 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. Although the indenture contains limitations on
the amount of additional Indebtedness that Protection One, Inc. and its
Restricted Subsidiaries may incur, under
29
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 equally 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, if any,
or interest on, 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
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 Protection One Alarm 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
30
(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 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 marshaling 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 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,
31
(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
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,
trans-
32
fer 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
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 notes, subordinate a holder's notes to Protection One Alarm
Monitoring's other debt or order a holder to return any amounts paid to the
holder under the notes to Protection One Alarm Monitoring or to a fund
benefiting Protection One Alarm Monitoring's creditors if the court found that,
at the time Protection One Alarm Monitoring sold the notes, it either (a)
intended to hinder, delay or defraud its creditors or (b) did not receive fair
value for the notes and, in the case of clause (b),
o was "insolvent," which means its debts were greater than the fair
value of all of its property, or Protection One Alarm Monitoring
became insolvent as a result of its obligations under the notes;
o was engaged or about to engage in a business or transaction for which
its remaining property was an unreasonably small capital; or
o intended to incur or believed that it would incur debts that would be
beyond its ability to pay as the debts matured.
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 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 provide for Additional Interest.
In the event that applicable interpretations of the staff of the SEC 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 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, pro-
33
vide to each holder copies of the prospectus, notify each holder when the 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.
Because the Exchange Offer was not consummated and a shelf registration
statement was not declared effective on or before the date that was six months
after the Issue Date, the annual interest rate borne by the notes was increased
by 0.50% per annum and will remain at this increased rate 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. Outstanding notes not tendered in the Exchange Offer
shall as of the consummation of this exchange offer revert to bearing interest
at the rate of 8 1/8% per annum and will be subject to all of the terms and
conditions specified in the indenture and to the transfer restrictions described
in "Transfer Restrictions." Registered notes issued in the Exchange Offer will
also bear interest rate of 8 1/8% per annum.
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 provides that all of the following restrictive covenants will
be applicable to Protection One, Inc. and its Restricted Subsidiaries unless and
until a Fall-Away Event occurs. In this event, 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 Event" above.
Limitation on Incurrence of Additional Indebtedness
The indenture provides 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 to 1.
34
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
None of Protection One, Inc., Protection One Alarm Monitoring or 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 ranked equally 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 provides 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;
(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
(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
35
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 do 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;
36
(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
(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.
37
In the case of clauses other than clauses (1), (2) and (7) above, 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 provides 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,
(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, if
any, and interest 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
38
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 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;
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 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
39
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 ranked equally 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.
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.
40
In addition to the Subsidiary Guarantors named in the indenture on the
Closing Date of the outstanding notes, the indenture provides 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 provides 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 provides 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 are 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 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,
41
(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 Protection One Alarm Monitoring and the trustee specifying
the respective Event of Default and that it is an "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 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.
42
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 is required to notify the trustee of the occurrence and
continuation of any Default or Event of Default promptly after Protection One
Alarm Monitoring becomes aware of the same.
43
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 is 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.
44
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.
45
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 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 of 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 is 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 is 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.
The Bank of New York acts as Trustee under various of our and our
affiliates' indentures, as rights agent under the shareholder rights plan of
Westar Industries and in various other capacities for us and our affiliates from
time to time, for which it receives customary compensation.
Governing Law
The indenture provides that it and the notes are 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
46
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 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
(1) all current liabilities of 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 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
47
(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,
(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 other 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
48
(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 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.
"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,
49
(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;
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
50
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
(e) all accrued interest and
(2) the interest component of Capitalized Lease Obligations paid or
accrued by the Person and its Restricted 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
51
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. The credit
agreement as so defined is now the agreement between Westar Industries, Inc. and
Protection One Alarm Monitoring.
"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
52
(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 any other statements by any 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,
53
(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,
(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 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
54
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
(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
55
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.
"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.
"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.
"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.
56
"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
(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.
"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.
"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;
57
(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 and a statement
that the 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 promptly mail to the Holders of
notes so accepted payment in an amount equal to the purchase price,
and
58
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.
"Officers' Certificate" means a certificate signed by the Chief Executive
Officer, the President, the Chief Financial Officer, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
Protection One Alarm Monitoring, and delivered to the Trustee.
"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 Protection One Alarm Monitoring or the trustee.
"Paying Agent" means any Person (including Protection One Alarm Monitoring
acting as Paying Agent) authorized by Protection One Alarm Monitoring to pay the
principal of, premium, if any, or interest on any notes on behalf of Protection
One Alarm Monitoring.
"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 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;
59
(5) additional Indebtedness of 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
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 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 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 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 Protection One, Inc. to any Restricted
Subsidiary, so long as it shall remain a Restricted Subsidiary of
Protection One, Inc., or by any Restricted Subsidiary, so long as it
remains a Restricted Subsidiary, to Protection One, Inc. or any
Restricted Subsidiary;
(8) guarantees by 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
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 Protection One, Inc. or any of its
Restricted Subsidiaries under those agreements, in each case incurred
in con-
60
nection with the disposition of any business assets or Subsidiaries of
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
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 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
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 Protection One, Inc. or
any of its Restricted Subsidiaries or merged into Protection One, Inc.
or any of its Restricted Subsidiaries in compliance with the terms of
the indenture; provided, however, that the Indebtedness is not
incurred in contemplation of the acquisition or merger; and provided
further that after giving effect to the acquisition or merger,
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.
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"Rating Agencies" means S&P and Moody's.
"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 Protection One Alarm Monitoring 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.
"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
62
(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 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 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 Subsidi-
63
ary receives at least its pro rata share of the dividend or
distribution in compliance with its interest in the Capital Stock on
shares of Protection One, Inc.'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 any 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 Protection
One, Inc. other than an Unrestricted Subsidiary and includes all of the
Subsidiaries of 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, as to Protection One Alarm Monitoring or any
Guarantor, whether outstanding on the Issue Date or thereafter issued, all
Indebtedness of Protection One Alarm Monitoring or the Guarantor, 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 the Guarantor or
any Restricted Subsidiary of Protection One Alarm Monitoring or the Guarantor,
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,
64
(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 Protection One Alarm
Monitoring 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.
"Stated Maturity," when used with respect to any notes or any installment
of principal thereof, means the date specified in such notes as the fixed date
on which the principal of such notes or such installment of principal is due and
payable.
"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 domestic Restricted
Subsidiary of 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.
65
"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 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
Protection One Alarm Monitoring, 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.
66
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
(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.
"Voting Stock" means stock of the class or classes having general voting
power under ordinary circumstances to elect at least a majority of the board of
directors, managers, trustees or individuals performing similar functions of a
Person (irrespective of whether or not at the time stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).
67
"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
(b) payment of principal, including payment at final maturity, in
respect thereof, by
(c) 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.
68
BOOK-ENTRY; DELIVERY AND FORM
The Global Certificate
The Depository Trust Company, New York, New York, or DTC, will act as
securities depository for the notes. The notes will be issued as fully
registered securities registered in the name of Cede & Co. (DTC's partnership
nominee) or such other name as may be requested by an authorized representative
of DTC. One fully registered note certificate will be issued for the notes, in
the aggregate principal amount of the issue, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Direct Participants") deposit with DTC.
DTC also facilitates the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Direct Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, LLC and the National Association of notes Dealers,
Inc. Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The Rules applicable to DTC and its Direct and
Indirect Participants are on file with the Securities and Exchange Commission.
Purchases of notes under the DTC system must be made by or through Direct
Participants, which will receive a credit for the notes on DTC's records. The
ownership interest of each actual purchaser of each note ("Beneficial Owner") is
in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Direct or Indirect Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interests in the
notes are to be accomplished by entries made on the books of Direct and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in notes, except in
the event that use of the book-entry system for the notes is discontinued. See
"Certificated Securities" below.
To facilitate subsequent transfers, all notes deposited by Participants
with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or
such other name as may be requested by an authorized representative of DTC. The
deposit of notes with DTC and their registration in the name of Cede & Co. or
such other nominee do not effect any change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the notes; DTC's records reflect
only the identity of the Direct Participants to whose accounts such notes are
credited, which Direct Participants may or may not be the Beneficial Owners. The
Direct and Indirect Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
69
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. Beneficial Owners of notes may wish to take
certain steps to augment the transmission to them of notices of significant
events with respect to the notes, such as redemptions, tenders, defaults and
proposed amendments to the security documents. Beneficial Owners of notes may
wish to ascertain that the nominee holding the notes for their benefit has
agreed to obtain and transmit notices to Beneficial Owners, or in the
alternative, Beneficial Owners may wish to provide their names and addresses to
the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the notes
within an issue are being redeemed, DTC's practice is to determine by lot the
amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or
vote with respect to the notes. Under its usual procedures, DTC mails an Omnibus
Proxy to us as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts notes are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
Redemption proceeds, distributions and dividend payments on the notes will
be made to Cede & Co. or such other nominee as may be requested by an authorized
representative of DTC. DTC's practice is to credit Direct Participants'
accounts, upon DTC's receipt of funds and corresponding detail information from
us or the exchange agent, on the payable date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of DTC, the exchange agent or us, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of redemption proceeds, distributions and dividends to Cede & Co. (or
such other nominee as may be requested by an authorized representative of DTC)
will be the responsibility of us or the exchange agent, disbursement of such
payments to Direct Participants will be the responsibility of DTC and
disbursement of such payments to the Beneficial Owners will be the
responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its notes purchased
or tendered, through its Participant, to the exchange agent, and shall effect
delivery of such notes by causing the Direct Participant to transfer the
Participant's interest in the notes, on DTC's records, to the exchange agent.
The requirement for physical delivery of notes in connection with an optional
tender or a mandatory purchase will be deemed satisfied when the ownership
rights in the notes are transferred by Direct Participants on DTC's records and
followed by a book-entry credit of tendered notes to the exchange agent's DTC
account.
Certificated Securities
DTC may discontinue providing its services as securities depository with
respect to the notes at any time by giving reasonable notice to us or the
exchange agent. Under such circumstances, in the
70
event that a successor securities depository is not obtained, note certificates
are required to be printed and delivered.
We may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event, note
certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
71
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 an "affiliate" of our company, Protection One, Inc. or any of its
subsidiaries, 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 "Exxon Capital Holdings Corporation" SEC No-Action Letter available May
13, 1988, the "Morgan Stanley & Co. Incorporated" SEC No-Action Letter available
June 5, 1991, the "Shearman & Sterling" SEC No-Action Letter available July 2,
1993 and the "Brown & Wood LLP" SEC No-Action Letter available February 7, 1997
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, 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. The letter of transmittal states that by
acknowledging that you will deliver and by delivering a prospectus meeting the
requirements of the Securities Act, you will not be admitting that you are an
underwriter within the meaning of the Securities Act.
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 any taxes you may incur in connection with the exchange offer and
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.
72
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
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 notes.
LEGAL MATTERS
Cahill Gordon & Reindel, New York, New York will pass upon certain legal
matters in connection with the registered notes being offered hereby.
EXPERTS
The consolidated financial statements and schedules of Protection One, Inc.
as of December 31, 2000 and 1999 and for the years ended December 31, 2000, 1999
and 1998 appearing in its annual report (Form 10-K) for the year ended December
31, 2000, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report 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 Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60611. You may call the
SEC at 1-800-SEC-0330 for
73
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 indenture governing your notes requires us to prepare and deliver copies of
these reports and other information to you upon your request, at no cost to you.
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 supersede the information then on file. We incorporate by reference the
following:
(1) the Form 10-K filed with the SEC on April 2, 2001; and
(2) our and Protection One's current report on Form 8-K filed with the SEC
on April 18, 2001.
This prospectus is accompanied by a copy of the Form 10-K which is attached
hereto as Appendix A. Supplements and amendments to the Form 10-K and reports on
Form 10-Q subsequent to the Form 10-K that we file with the SEC prior to the
expiration date will also be furnished to you and incorporated in this
prospectus by reference. 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 other 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 Alarm Monitoring, Inc., 818 S.
Kansas Avenue, Topeka, Kansas 66612, phone (785) 575-1707, Attention: Secretary.
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone to provide you with
different or additional information. We are not making an offer to exchange any
notes in any state or country where the exchange offer is not permitted. You
should not assume that the information in this prospectus is accurate as of any
date other than the date on the front of this prospectus.
74
================================================================================
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
EXCHANGE, OR A SOLICITATION OF AN OFFER TO EXCHANGE, ANY SECURITY OTHER THAN THE
SECURITIES TO WHICH IT RELATES, OR ANY OFFER TO EXCHANGE OR A SOLICITATION OF AN
OFFER TO EXCHANGE 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 EXCHANGE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS FOUND IN
THIS PROSPECTUS OR IN OUR AFFAIRS SINCE THE DATE OF THIS PROSPECTUS.
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. AND
NETWORK MULTI-FAMILY SECURITY CORPORATION
-----------------------
PROSPECTUS
-----------------------
April 27, 2001
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
================================================================================
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. and Network Multi-Family 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 Protection 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 Protection One, Inc. or Protection
One Alarm Monitoring 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.
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
II-1
by POI and Protection One Alarm Monitoring, Inc. ("Monitoring") dated July
30, 1997 (the "July 1997 Form 8-K")). The Commission File Number of POI is
0-24780. The Commission File Number of Monitoring is 33-73002-01.
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 Monitoring dated October 2, 1997).
2.3 Amendment No. 2 dated February 29, 2000 to the Contribution Agreement
(incorporated by reference to Exhibit 10.2 to the Current Report on Form
8-K filed by POI and Monitoring dated February 29, 2000).
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 Monitoring for the year ended September 30, 1997 (the
"Fiscal 1997 Form 10-K")).
3.2 Amendment dated as of November 24, 1997 to Fifth Amended and Restated
Certificate of Incorporation of POI.
3.3 By-laws of POI (incorporated by reference to Exhibit 3.1 to the Quarterly
Report on Form 10-Q filed by POI and Monitoring for the quarter ended March
31, 1996).
3.4 Certificate of Incorporation of 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 Monitoring and, inter
alia, POI on August 1,1996 (the "August 1996 Form S-3")).
3.5 Bylaws of Monitoring (incorporated by reference to Exhibit 3.2 to the
Annual Report on Form 10-K filed by POI and, inter alia, Monitoring for the
year ended September 30, 1994).
4.1 Indenture dated as of May 17, 1995, among 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, Monitoring on July 18, 1995 (the "1995 Form S-4")).
4.2 First Supplemental Indenture dated as of July 26, 1996, among 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
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
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 Third Supplemental Indenture dated as of February 14, 2000 among Monitoring
as Issuer, POI inter alia, as Guarantor and SSBTC as Trustee (incorporated
by reference to Exhibit 4.4 to the Annual Report on Form 10-K filed by POI
and Monitoring for the year ended December 31, 2000 (the "Fiscal 2000 Form
10-K")).
4.5 Subordinated Debt Shelf Indenture dated as of August 29, 1996, among
Monitoring as Issuer, POI as Guarantor and SSBTC as Trustee (incorporated
by reference to Exhibit 4.2 to the August 1996 Form S-3).
II-2
4.6 Supplemental Indenture No. 1 dated as of September 20, 1996, among
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 Monitoring and dated September 20,1996 (the "September
1996 Form 8-K")).
4.7 Supplemental Indenture No. 2 dated as of October 28, 1996, among 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).
4.8 Supplemental Indenture No. 3 dated as of February 14, 2000, among
Monitoring as Issuer, POI, inter alia, as Guarantor and SSBTC as Trustee
(incorporated by reference to Exhibit 4.8 to the "Fiscal 2000 Form 10-K").
4.9 Indenture, dated as of August 17, 1998, among 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 S-4 filed by POI and
Monitoring on September 22, 1998).
4.10 Indenture governing the 8 1/8% Senior Subordinated Notes due 2009, dated as
of December 21, 1998, among Monitoring, as issuer, POI, as guarantor, and
The Bank of New York, as trustee (incorporated by reference to Exhibit 4.17
to the Annual Report on Form 10-K filed by POI and Monitoring for the year
ended December 31, 1998 (the "Fiscal 1998 Form 10-K")).
4.11 Form of 8 1/8% Senior Subordinated Note due 2009 of Monitoring (included in
exhibit 4.10 hereto).
5.1 Legal opinion of Cahill Gordon & Reindel 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, Monitoring for the quarter ended March 31, 1994).
10.2 Warrant Agreement dated as of November 3, 1993, between 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, Monitoring and
certain former subsidiaries of Monitoring on December 15, 1993 (the "1993
Form S-4")).
10.3 Registration Rights Agreement dated as of November 3, 1993, among
Monitoring, POI, certain former subsidiaries of Monitoring and Bear,
Stearns & Co., Inc. (incorporated by reference to Exhibit 4.4 to the 1993
Form S-4).
10.4 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).
10.5 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).
10.6 1994 Stock Option Plan of POI, as amended (incorporated by reference to
Exhibit 10.23 to the Fiscal 1996 Form 10-K).
10.7 1997 Long-Term Incentive Plan of POI (incorporated by reference to Appendix
F to POI's proxy statement dated November 7, 1997).
II-3
10.8 Notes Registration Rights Agreement dated as of May 17, 1995, among POI,
Monitoring, Morgan Stanley & Co., Incorporated and Montgomery Securities
(incorporated by reference to Exhibit 4.2 to the 1995 Form S-4).
10.9 Revolving Credit Agreement among 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 Fiscal 1998 Form 10-K).
10.10 First Amendment to the Revolving Credit Agreement, dated as of February
26, 1999 (incorporated by reference to Exhibit 10.28 to the Fiscal 1998
Form 10-K).
10.11 Agreement, dated as of February 29, 2000, by and among POI, Monitoring,
and Westar Industries, Inc. (incorporated by reference to Exhibit 10.1 to
the Current Report on Form 8-K filed by POI and Monitoring dated February
29, 2000).
10.12 Second Amendment of Credit Agreement, effective as of February 29, 2000,
between Monitoring and Westar Industries, Inc., as Administrative Agent and
a Lender (incorporated by reference to Exhibit 10.3 to the Current Report
on Form 8-K filed by POI and Monitoring dated February 29, 2000).
10.13 Registration Rights Agreement governing the 8 1/8% Senior Subordinated
Notes due 2009, dated December 21, 1998, among 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 Fiscal 1998 Form 10-K).
10.14 Form of Change of Control Agreement with Annette M. Beck and Anthony Somma
(incorporated by reference to Exhibit 10.16 to the Annual Report on Form
10-K filed by POI and Monitoring for the year ended December 31, 1999 (the
"Fiscal 1999 Form 10-K")) .
10.15 Third Amendment to the Revolving Credit Agreement, dated as of January 2,
2001, between Monitoring and Westar Industries, Inc., as Administrative
Agent and as a Lender (incorporated by reference to Exhibit 10.15 to the
Fiscal 2000 Form 10-K).
10.16 Fourth Amendment to the Revolving Credit Agreement, dated as of February
28, 2001, between Monitoring and Westar Industries, Inc., as Administrative
Agent and as a Lender (incorporated by reference to Exhibit 10.16 to the
Fiscal 2000 Form 10-K).
12.1 Statement regarding Computation of Earnings to Fixed Charges. *
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
Monitoring dated February 5, 1998).
21.1 Subsidiaries of POI and Monitoring (incorporated by reference to Exhibit
21.1 to the Fiscal 2000 Form 10-K).
23.1 Consent of Arthur Andersen LLP. *
23.2 Consent of Cahill Gordon & Reindel (included in Exhibit 5.1). *
II-4
24.1 Powers of Attorney (previously filed on the signature pages of this
registration statement).
25.1 Statement of Eligibility of Trustee. *
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 Monitoring
on March 17, 1998).
99.2 Placement Agreement, dated December 16, 1998, among Monitoring, POI and
various subsidiary guarantors and the Placement Agents (incorporated by
reference to Exhibit 99.3 to the 1998 Form 10-K).
99.3 Form of Letter of Transmittal. *
99.4 Form of Notice of Guaranteed Delivery. *
- ----------------------------
* Previously filed.
ITEM 22. UNDERTAKINGS.
The undersigned Co-Registrants hereby undertake:
(1) That, for purposes of determining any liability under the Securities
Act, each filing of each Co-Registrant's annual report pursuant to
section 13(a) or section 15(d) of the Exchange Act (and, where,
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(2) To respond to requests for information that is incorporated by
reference into the prospectus under Items 4, 10, 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.
(3) 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-5
SIGNATURES
Under the requirements of the Securities Act of 1933, each undersigned
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 Amendment No. 2
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Topeka, State of Kansas, on April 27,
2001.
PROTECTION ONE, INC.
PROTECTION ONE ALARM MONITORING, INC.
By: /s/ ANTHONY D. SOMMA
----------------------
Anthony D. Somma
Chief Financial Officer,
Secretary and Treasurer
Under the requirements of the Securities Act of 1933, this Amendment No. 2
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
* /s/ DOUGLAS T. LAKE Chairman of the Board April 27, 2001
- ---------------------------------------
Douglas T. Lake
/s/ RICHARD GINSBURG Chief Executive Officer and Director April 27, 2001
- --------------------------------------- (Principal Executive Officer)
Richard Ginsburg
/s/ ANTHONY D. SOMMA Chief Financial Officer, Secretary April 27, 2001
- --------------------------------------- and Treasurer (Principal Financial and
Anthony D. Somma Accounting Officer)
* /s/ ANNETTE M. BECK Director April 27, 2001
- ---------------------------------------
Annette M. Beck
* /s/ HOWARD A. CHRISTENSEN Director April 27, 2001
- ---------------------------
Howard A. Christensen
* /s/ MARIA DE LOURDES DUKE Director April 27, 2001
- ---------------------------
Maria de Lourdes Duke
* /s/ BEN M. ENIS Director April 27, 2001
- ---------------------------------------
Ben M. Enis
* /s/ DONALD A. JOHNSTON Director April 27, 2001
- ---------------------------------------
Donald A. Johnston
* /s/ CARL M. KOUPAL, JR. Director April 27, 2001
- ---------------------------------------
Carl M. Koupal, Jr.
* /s/ JOHN H. ROBINSON Director April 27, 2001
- ---------------------------------------
John H. Robinson
* /s/ RITA A. SHARPE Director April 27, 2001
- ---------------------------------------
Rita A. Sharpe
II-6
* /s/ STEVEN V. WILLIAMS Director April 27, 2001
- ---------------------------------------
Steven V. Williams
* /s/ JAMES Q. WILSON Director April 27, 2001
- ---------------------------------------
James Q. Wilson
- -----------------------------
* Pursuant to Power of Attorney filed
with the SEC as Exhibit 24.1
By: /s/ ANTHONY D. SOMMA Attorney-in-Fact April 27, 2001
-----------------------------------
Anthony D. Somma
SIGNATURES
Under the requirements of the Securities Act of 1933, the undersigned
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 Amendment No. 2
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Topeka, State of Kansas, on April 27,
2001.
NETWORK MULTI-FAMILY SECURITY CORPORATION
By: /s/ STEVEN V. WILLIAMS
---------------------------------------------------------
Steven V. Williams
President
Under the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
* /s/ STEVEN V. WILLIAMS President and Director April 27, 2001
- --------------------------------------- (Principal Executive Officer)
Steven V. Williams
* /s/ STEVE PARKER Vice President and Treasurer April 27, 2001
- --------------------------------------- (Principal Financial and Accounting
Steve Parker Officer)
* /s/ ANNETTE M. BECK Director April 27, 2001
- ---------------------------------------
Annette M. Beck
/s/ ANTHONY D. SOMMA Director April 27, 2001
- ---------------------------------------
Anthony D. Somma
II-7
- ----------------------------------------------
* Pursuant to Power of Attorney filed
with the SEC as Exhibit 24.1
By: /s/ ANTHONY D. SOMMA Attorney-in-Fact April 27, 2001
-----------------------------------
Anthony D. Somma
II-8
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 and Protection One Alarm Monitoring, Inc. ("Monitoring") dated
July 30, 1997 (the "July 1997 Form 8-K")). The Commission File Number of
POI is 0-24780. The Commission File Number of Monitoring is 33-73002-01.
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 Monitoring dated October 2, 1997).
2.3 Amendment No. 2 dated February 29, 2000 to the Contribution Agreement
(incorporated by reference to Exhibit 10.2 to the Current Report on Form
8-K filed by POI and Monitoring dated February 29, 2000).
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 Monitoring for the year ended September 30, 1997 (the
"Fiscal 1997 Form 10-K")).
3.2 Amendment dated as of November 24, 1997 to Fifth Amended and Restated
Certificate of Incorporation of POI.
3.3 By-laws of POI (incorporated by reference to Exhibit 3.1 to the Quarterly
Report on Form 10-Q filed by POI and Monitoring for the quarter ended March
31, 1996).
3.4 Certificate of Incorporation of 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 Monitoring and, inter
alia, POI on August 1,1996 (the "August 1996 Form S-3")).
3.5 Bylaws of Monitoring (incorporated by reference to Exhibit 3.2 to the
Annual Report on Form 10-K filed by POI and, inter alia, Monitoring for the
year ended September 30, 1994).
4.1 Indenture dated as of May 17, 1995, among 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, Monitoring on July 18, 1995 (the "1995 Form S-4")).
4.2 First Supplemental Indenture dated as of July 26, 1996, among 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
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
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 Third Supplemental Indenture dated as of February 14, 2000 among Monitoring
as Issuer, POI inter alia, as Guarantor and SSBTC as Trustee (incorporated
by reference to Exhibit 4.4 to the Annual Report on Form 10-K filed by POI
and Monitoring for the year ended December 31, 2000 (the "Fiscal 2000 Form
10-K")).
4.5 Subordinated Debt Shelf Indenture dated as of August 29, 1996, among
Monitoring as Issuer, POI as Guarantor and SSBTC as Trustee (incorporated
by reference to Exhibit 4.2 to the August 1996 Form S-3).
4.6 Supplemental Indenture No. 1 dated as of September 20, 1996, among
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 Monitoring and dated September 20,1996 (the "September
1996 Form 8-K")).
4.7 Supplemental Indenture No. 2 dated as of October 28, 1996, among 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).
4.8 Supplemental Indenture No. 3 dated as of February 14, 2000, among
Monitoring as Issuer, POI, inter alia, as Guarantor and SSBTC as Trustee
(incorporated by reference to Exhibit 4.8 to the "Fiscal 2000 Form 10-K").
4.9 Indenture, dated as of August 17, 1998, among 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 S-4 filed by POI and
Monitoring on September 22, 1998).
4.10 Indenture governing the 8 1/8% Senior Subordinated Notes due 2009, dated as
of December 21, 1998, among Monitoring, as issuer, POI, as guarantor, and
The Bank of New York, as trustee (incorporated by reference to Exhibit 4.17
to the Annual Report on Form 10-K filed by POI and Monitoring for the year
ended December 31, 1998 (the "Fiscal 1998 Form 10-K")).
4.11 Form of 8 1/8% Senior Subordinated Note due 2009 of Monitoring (included in
exhibit 4.10 hereto).
5.1 Legal opinion of Cahill Gordon & Reindel 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, Monitoring for the quarter ended March 31, 1994).
10.2 Warrant Agreement dated as of November 3, 1993, between 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, Monitoring and
certain former
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subsidiaries of Monitoring on December 15, 1993 (the "1993 Form S-4")).
10.3 Registration Rights Agreement dated as of November 3, 1993, among
Monitoring, POI, certain former subsidiaries of Monitoring and Bear,
Stearns & Co., Inc. (incorporated by reference to Exhibit 4.4 to the 1993
Form S-4).
10.4 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).
10.5 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).
10.6 1994 Stock Option Plan of POI, as amended (incorporated by reference to
Exhibit 10.23 to the Fiscal 1996 Form 10-K).
10.7 1997 Long-Term Incentive Plan of POI (incorporated by reference to Appendix
F to POI's proxy statement dated November 7, 1997).
10.8 Notes Registration Rights Agreement dated as of May 17, 1995, among POI,
Monitoring, Morgan Stanley & Co., Incorporated and Montgomery Securities
(incorporated by reference to Exhibit 4.2 to the 1995 Form S-4).
10.9 Revolving Credit Agreement among 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 Fiscal 1998 Form 10-K).
10.10 First Amendment to the Revolving Credit Agreement, dated as of February
26, 1999 (incorporated by reference to Exhibit 10.28 to the Fiscal 1998
Form 10-K).
10.11 Agreement, dated as of February 29, 2000, by and among POI, Monitoring,
and Westar Industries, Inc. (incorporated by reference to Exhibit 10.1 to
the Current Report on Form 8-K filed by POI and Monitoring dated February
29, 2000).
10.12 Second Amendment of Credit Agreement, effective as of February 29, 2000,
between Monitoring and Westar Industries, Inc., as Administrative Agent and
a Lender (incorporated by reference to Exhibit 10.3 to the Current Report
on Form 8-K filed by POI and Monitoring dated February 29, 2000).
10.13 Registration Rights Agreement governing the 8 1/8% Senior Subordinated
Notes due 2009, dated December 21, 1998, among 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 Fiscal 1998 Form 10-K).
10.14 Form of Change of Control Agreement with Annette M. Beck and Anthony Somma
(incorporated by reference to Exhibit 10.16 to the Annual Report on Form
10-K filed by POI and Monitoring for the year ended December 31, 1999 (the
"Fiscal 1999 Form 10-K"))
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10.15 Third Amendment to the Revolving Credit Agreement, dated as of January 2,
2001, between Monitoring and Westar Industries, Inc., as Administrative
Agent and as a Lender (incorporated by reference to Exhibit 10.15 to the
Fiscal 2000 Form 10-K).
10.16 Fourth Amendment to the Revolving Credit Agreement, dated as of February
28, 2001, between Monitoring and Westar Industries, Inc., as Administrative
Agent and as a Lender (incorporated by reference to Exhibit 10.16 to the
Fiscal 2000 Form 10-K).
12.1 Statement regarding Computation of Earnings to Fixed Charges. *
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
Monitoring dated February 5, 1998).
21.1 Subsidiaries of POI and Monitoring (incorporated by reference to Exhibit
21.1 to the Fiscal 2000 Form 10-K).
23.1 Consent of Arthur Andersen LLP. *
23.2 Consent of Cahill Gordon & Reindel (included in Exhibit 5.1). *
24.1 Powers of Attorney (previously filed on the signature pages of this
registration statement).
25.1 Statement of Eligibility of Trustee. *
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 Monitoring
on March 17, 1998).
99.2 Placement Agreement, dated December 16, 1998, among Monitoring, POI and
various subsidiary guarantors and the Placement Agents (incorporated by
reference to Exhibit 99.3 to the 1998 Form 10-K).
99.3 Form of Letter of Transmittal. *
99.4 Form of Notice of Guaranteed Delivery. *
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* Previously filed.
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Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated March 9, 2001
included in Protection One, Inc.'s Form 10-K for the year ended December 31,
2000, and to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Kansas City, Missouri
April 27, 2001