<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1996.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PROTECTION ONE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7382 93-1063818
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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6011 BRISTOL PARKWAY
CULVER CITY, CALIFORNIA 90230
(310) 338-6930
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JAMES M. MACKENZIE, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PROTECTION ONE, INC.
6011 BRISTOL PARKWAY
CULVER CITY, CALIFORNIA 90230
(310) 338-6930
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPY TO:
LAURA A. LOFTIN, ESQ.
MITCHELL, SILBERBERG & KNUPP LLP
11377 WEST OLYMPIC BOULEVARD
LOS ANGELES, CALIFORNIA 90064
(310) 312-2000
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered solely in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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 pursuant to Rule 462(c)
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. / /__________
------------------------
CALCULATION OF REGISTRATION FEE
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- ------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------
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Common Stock, par value $.01
per share................... 450,000 shares $14.34 $6,453,000 $2,225.17
- ------------------------------------------------------------------------------------------------------
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(1) Pursuant to Rule 457(c) promulgated under the Securities Act of 1933, the
offering price per share, the aggregate offering price and the registration
fee were calculated based on the average of the high and low sale prices of
the Common Stock on the Nasdaq National Market on June 7, 1996.
------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant 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 the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a) of the
Securities Act of 1933, may determine.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 12, 1996
PROSPECTUS
450,000 SHARES
PROTECTION ONE, INC.
COMMON STOCK
This Prospectus relates to an aggregate of 450,000 shares (the "Shares") of
Common Stock, par value $.01 per share ("Common Stock"), of Protection One,
Inc., a Delaware corporation ("Protection One" and together with its
subsidiaries, the "Company"), that may be offered and sold, from time to time,
by certain stockholders of Protection One (the "Selling Stockholders"). See
"Selling Stockholders." The Shares were issued to the Selling Stockholders in a
private placement made in connection with the acquisition of the stock of Metrol
Security Services, Inc. by the Company completed on June , 1996. See "The
Acquisition."
The Selling Stockholders may from time to time sell the shares covered by
this Prospectus (a) to underwriters who will acquire the shares for their own
account and resell such shares in one or more transactions, including negotiated
transactions, at a fixed price or at varying prices determined at the time of
sale, (b) through brokers or dealers, acting as principal or agent, in
transactions (which may involve block transactions) on the Nasdaq National
Market in ordinary brokerage transactions, in negotiated transactions or
otherwise, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices, at negotiated prices or otherwise, or (c)
directly or indirectly through brokers or agents in private sales at negotiated
prices, or in any combination of such methods of sale. Underwriters
participating in any offering may receive underwriting discounts and
commissions, and discounts or concessions may be allowed or re-allowed or paid
to dealers, and brokers or agents participating in such transactions may receive
brokerage or agent's commissions or fees. The Selling Stockholders will be
responsible for all commissions and fees so incurred. To the extent required,
the aggregate amount of Shares being offered and the terms of the offering, the
names of any such agents, dealers or underwriters and any applicable commission
with respect to a particular offer will be set forth in an accompanying
Prospectus Supplement. See "Plan of Distribution."
The aggregate proceeds to the Selling Stockholders from the sale of the
Shares will be the selling price of the Shares. The Company will not receive any
proceeds from this offering, but will pay all of the expenses of this offering
other than commissions and discounts of agents, dealers or underwriters. Such
expenses are estimated to be approximately $10,000.
The Selling Stockholders and any agents, dealers or underwriters that
participate in the distribution of the Shares may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), and any and all commissions received by them and any profit on the resale
of the Shares purchased by them may be deemed underwriting commissions or
discounts under the Securities Act.
The Common Stock is traded on the Nasdaq National Market under the symbol
"ALRM." On June 11, 1996, the last reported sale price for the Common Stock was
$14.25 per share.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
No person has been authorized in connection with the offering made hereby
to give any information or to make any representation not contained in this
Prospectus, and if given or made, such information or representation must not be
relied upon as having been authorized by the Company or any Selling Stockholder.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstance, create any implication that there has been no change in the
affairs of the Company since the date of this Prospectus or that the information
contained herein is correct as of any time subsequent to the date hereof. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the shares of Common Stock offered hereby, nor does
this Prospectus constitute an offer to sell or a solicitation of an offer to buy
any of the securities offered hereby to any person or under any circumstance in
which such offer or solicitation is unlawful.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by Protection One with the Commission are
incorporated in this Prospectus by reference:
A. Protection One's Annual Report on Form 10-K for the year ended
September 30, 1995, as amended by Amendment No. 1 on Form 10-K/A filed with
the Commission on December 29, 1995;
B. Protection One's Quarterly Reports on Form 10-Q for the quarters
ended December 31, 1995 and March 31, 1996;
C. Protection One's Current Report on Form 8-K reporting an event
dated May 23, 1996;
D. The description of the Common Stock contained in Protection One's
Registration Statement on Form 8-A dated September 8, 1994; and
E. Protection One's Proxy Statement dated January 2, 1996 for
Protection One's Annual Meeting of Stockholders held on January 26, 1996.
All documents filed by Protection One pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), subsequent to the date of this Prospectus and prior to the termination of
the offering made hereby shall be deemed to be incorporated by reference herein
and to be a part hereof from the date of filing of such document. Any statement
contained in a document incorporated or deemed incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Protection One will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, on the
written or oral request of such person, a copy of any or all of the information
that has been or hereafter is incorporated by reference herein (other than
exhibits to such information, unless such exhibits are specifically incorporated
by reference into the information that this Prospectus incorporates). Requests
for copies should be directed to: Protection One, Inc., 3900 S.W. Murray
Boulevard, Beaverton, Oregon 97005, Attn: Montgomery Cornell, Director of
Investor Relations; telephone (503) 520-6019.
TABLE OF CONTENTS
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PAGE
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Incorporation of Certain Information by Reference..................................... 2
Available Information................................................................. 3
Prospectus Summary.................................................................... 4
Risk Factors.......................................................................... 5
The Acquisition....................................................................... 11
Use of Proceeds....................................................................... 11
Description of Capital Stock.......................................................... 11
Selling Stockholders.................................................................. 13
Plan of Distribution.................................................................. 13
Legal Matters......................................................................... 14
Experts............................................................................... 15
</TABLE>
2
<PAGE> 4
AVAILABLE INFORMATION
Protection One is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by Protection One with the
Commission may be inspected without charge and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, New York, New York 10048, and 500 West Madison Street, Chicago,
Illinois 60661. Copies of such materials may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and the Commission's public reference facilities in New York, New York,
and Chicago, Illinois, at prescribed rates. The Common Stock is traded on the
Nasdaq National Market. Reports, proxy statements and other information
concerning Protection One also may be inspected at the office of the National
Association of Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C.
20006.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by Protection One with the Commission under
the Securities Act. As permitted by the Securities Act, this Prospectus omits
certain information contained in the Registration Statement, and reference is
made to the Registration Statement and the exhibits thereto for further
information with respect to Protection One and the Common Stock offered hereby.
This Prospectus contains summaries of the material terms and provisions of
certain documents, and in each instance reference is made to the copy of such
document included in the Registration Statement as an exhibit thereto for a
complete statement of such document's provisions. Each such summary is qualified
in its entirety by such reference.
Protection One(R) is a trademark of Protection One, Inc.
------------------------
Information contained in this Prospectus assumes that the acquisition by
Protection One Alarm Monitoring, Inc. of all of the capital stock of Metrol
Security Services, Inc. has been consummated. Such consummation is subject to
the satisfaction of a number of conditions, many of which are beyond the control
of the Company, and there can be no assurance that such acquisition will occur.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information set forth elsewhere in this Prospectus. Unless otherwise indicated
or the context otherwise requires, as used in this Prospectus, the "Company"
means Protection One, Inc., a Delaware corporation, and its wholly owned
subsidiaries, including Protection One Alarm Monitoring, Inc. ("Monitoring").
THE COMPANY
Protection One, Inc. and its subsidiaries provide security alarm monitoring
services for residential and small business subscribers. As of March 31, 1996,
the Company had approximately 165,000 subscribers, approximately 80% of which
were residential subscribers (single family homes and multiple-family
dwellings). The Company believes that based on the number of subscribers, the
Company is the fourth largest residential security alarm monitoring company in
the United States and the largest in the five western states of Arizona,
California, Nevada, Oregon and Washington.
The Company's revenues consist primarily of recurring payments under
written contracts for the monitoring and servicing of security alarm systems and
the provision of additional enhanced security services. For the six months ended
March 31, 1996, monitoring and service revenues represented approximately 89.0%
of total revenues. The Company monitors digital signals arising from burglaries,
fires and other events through security systems installed at subscribers'
premises. Most of these signals are received and processed at the Company's
central monitoring station located in Portland, Oregon, which as currently
configured has the capacity to support up to 250,000 subscribers. The Company
also sells enhanced security services, patrol and alarm response services and
security alarm systems sand provides local field repair services through nine
branch offices. Enhanced security services provided by the Company include
two-way voice communication, supervised monitoring services, pager service,
wireless backup service and extended service protection.
The Company's strategy is to enhance its position as the largest
residential security alarm monitoring company in the western United States by
pursuing a balanced growth plan incorporating the purchase of subscriber
accounts from independent security alarm system dealers with whom the Company
has exclusive purchase agreements (the "Dealer Program"), acquisitions of
portfolios of subscriber accounts, the sale of enhanced devices and new alarm
systems and possible strategic joint ventures or other strategic alliances.
Protection One, Inc. was incorporated in Delaware in September 1991. The
executive offices of the Company are located at 6011 Bristol Parkway, Culver
City, California 90230, and the Company's telephone number at that address is
(310) 338-6930.
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RISK FACTORS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Actual results could differ materially from
those projected in the forward-looking statements as a result of certain of the
risk factors set forth below and elsewhere in this Prospectus. In addition to
the other information set forth and incorporated by reference in this
Prospectus, the following risk factors should be considered carefully in
evaluating an investment in the Common Stock offered hereby:
Risks Related to High Leverage. The Company is highly leveraged. At March
31, 1996, the Company's consolidated indebtedness was approximately $168.3
million, and the Company had unused borrowing capacity of approximately $28.5
million under the Company's revolving credit facility with three banks (the
"Revolving Credit Facility"). Future additions of subscriber accounts through
the Dealer Program and acquisitions of subscriber account portfolios will
require additional borrowing under the Revolving Credit Facility, thereby
further increasing the Company's leverage. See "-- Risks Related to
Acquisitions." In addition, the principal amount of Monitoring's 13-5/8% Senior
Subordinated Discount Notes due 2005 (the "Discount Notes") will accrete in
value until June 30, 1998.
The indenture pursuant to which the Discount Notes were issued (the
"Indenture") does not provide for any current amortization of principal or
require the Company to establish any reserves or sinking funds in respect of the
payment of principal. As a result, the Company will be required to repay the
full principal amount of the Discount Notes ($166.0 million) on June 30, 2005.
There can be no assurance that the Company will have the cash necessary to repay
the Discount Notes at maturity or will be able to refinance such obligations. In
addition, all borrowings then outstanding under the Revolving Credit Facility
will be due in full on January 3, 2000. Although the Company has obtained, and
believes that in future it will be able to continue to obtain, extensions of the
maturity date of the Revolving Credit Facility from time to time, or will be
able to refinance the Revolving Credit Facility prior to its maturity date,
there can be no assurance that the Company will be able to do so.
The Company's ability to continue to service its indebtedness will be
subject to various business, financial and other factors, many of which are
beyond the Company's control. In addition, each of the Indenture and the
agreement governing the Revolving Credit Facility includes covenants that
restrict the operational and financial flexibility of the Company. Failure to
comply with certain covenants would, in some instances, permit the holders of
the Discount Notes or the lenders under the Revolving Credit Facility to
accelerate the maturity of the Company's obligations thereunder, and in other
instances could result in cross-defaults permitting the acceleration of all such
debt and debt under other agreements.
The Company's high degree of leverage may have important consequences to
holders of the Common Stock, including the following: (i) a substantial portion
of the Company's cash flow from operations is, and will continue to be,
dedicated to the payment of the principal of and interest on the Company's
existing indebtedness, thereby reducing the funds available to the Company for
its operations and future growth or other business opportunities; (ii) the
Company's ability to obtain additional financing in the future for working
capital, the Dealer Program, acquisitions of portfolios of subscriber accounts,
capital expenditures, general corporate purposes or other purposes may be
impaired; (iii) the Indenture and the agreements governing the Revolving Credit
Facility contain, and are expected to continue to contain, certain restrictive
covenants, including certain covenants that require the Company to obtain the
consent of the lenders under the Revolving Credit Facility and to maintain
certain financial ratios in order to undertake significant acquisitions of
portfolios of subscriber accounts; (iv) the Company's borrowings under the
Revolving Credit Facility are at floating rates of interest, causing the Company
to be vulnerable to increases in interest rates; (v) the Company will be more
vulnerable to a downturn in the Company's business or the economy generally; and
(vi) the Company's ability to compete against other less leveraged companies may
be adversely affected.
Risks Related to Acquisitions. A principal element of the Company's
business strategy is to acquire portfolios of alarm monitoring accounts. During
the three fiscal years ended September 30, 1995, the Company completed 87
acquisitions of the portfolios of subscriber accounts of other alarm service
companies, and those acquisitions were the primary source of the Company's
growth during that period. Although the
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Dealer Program is anticipated to be an increasingly important component of the
Company's growth, an additional 18 portfolios of subscriber accounts were
acquired during the first two quarters of the fiscal year ending September 30,
1996 ("fiscal 1996"), and acquisitions of portfolios of subscriber accounts are
expected to continue. The Company faces competition for the acquisition of
portfolios of subscriber accounts, and may be required to offer higher prices
for acquired accounts than the Company has in the past. See "- Competition." In
addition, due to the continuing consolidation of the security alarm industry and
the acquisition by the Company and other alarm companies of a number of large
portfolios of subscriber accounts, there may in the future be fewer large
portfolios of subscriber accounts available for acquisition. There can be no
assurance that the Company will be able to find acceptable acquisition
candidates or, if such candidates are identified, that acquisitions can be
consummated on terms acceptable to the Company.
Acquisitions of portfolios of subscriber accounts involve a number of
special risks, including the possibility of unanticipated problems not
discovered prior to the acquisition, account attrition and the diversion of
management's attention from other business activities in order to focus on the
assimilation of accounts. For acquisitions that are structured as the purchase
of the stock of other alarm companies, the Company may assume unexpected
liabilities and must dispose of the unnecessary assets of the acquired
companies.
Because the Company's primary consideration in acquiring a portfolio of
subscriber accounts is the amount of cash flow that can be derived from the
monthly recurring revenue ("MRR") associated with the purchased accounts, the
price paid by the Company is customarily directly tied to such MRR. The price
paid varies based on the number and quality of accounts being purchased from the
seller, the historical activity of such accounts and other factors. The seller
typically does not have audited historical financial information with respect to
the acquired accounts, and no such information was provided to the Company prior
to the closing of the 16 largest acquisitions made by the Company during the
three years ended September 30, 1995. Thus, in making acquisitions the Company
has relied on management's knowledge of the industry, due diligence procedures
and representations and warranties of the sellers. There can be no assurance
that such representations and warranties are true and complete or, if such
representations and warranties are inaccurate, that the Company will be able to
recover from the seller damages in an amount sufficient to fully compensate the
Company for any resulting losses. The Company expects that future acquisitions
will present the same risks to the Company as its prior acquisitions.
An important aspect of the Company's acquisition program is the
assimilation of subscriber accounts into the Company's operations after
purchase. Depending on the size, frequency and location of acquisitions, the
assimilation of subscribers may adversely affect the provision of field repair
services to existing subscribers, which may cause subscriber attrition to
increase. In addition, if the Company's corporate or branch operations fail to
assimilate a substantial portion of acquired subscriber accounts, the Company
may experience higher attrition in the future.
History of Losses. The Company incurred losses attributable to common stock
of $18.5 million for the year ended September 30, 1995 ("fiscal 1995"), $9.2
million for fiscal 1994, $4.6 million for fiscal 1993 and $5.0 million for
fiscal 1992. ("Losses attributable to common stock" means the Company's net
loss, less dividends payable on preferred stock.) These losses reflect, among
other factors, the substantial charges incurred by the Company for amortization
of purchased subscriber accounts, interest incurred on the Company's
indebtedness and extraordinary losses on early extinguishment of debt. Such
charges, with the exception of the extraordinary losses, will increase as the
Company continues to purchase subscriber accounts, if the Company's indebtedness
increases, or if interest rates increase. The Company's earnings have been
insufficient to cover its fixed charges since the Company was formed, and there
can be no assurance that the Company will attain profitable operations.
Risks Related to the Dealer Program. During fiscal 1995, the Company
increased its emphasis on the Dealer Program, which became a more significant
source of growth than in prior years. The Company has continued this emphasis in
fiscal 1996. Several of the Company's competitors also have dealer programs, and
there can be no assurance that the Company will be able to retain or expand its
current dealer base or that competitive offers to the Company's dealers will not
require the Company to pay higher prices to the Company's dealers for subscriber
accounts than previously paid. The Company's five highest producing
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dealers generated approximately 49.6% of the total subscriber accounts purchased
by the Company through the Dealer Program in the second quarter of fiscal 1996.
The loss of any of such dealers would negatively impact the Company's growth.
Need for Additional Capital. In fiscal 1994 and 1995, the Company invested
a total of approximately $127.4 million in acquisitions of portfolios of
subscriber accounts and purchases of subscriber accounts through the Dealer
Program. Net cash provided by operating activities totaled approximately $15.9
million during fiscal 1994 and 1995. The Company used borrowings under the
Revolving Credit Facility and proceeds from offerings of debt and equity
securities to fund the remainder of the Company's investing activities during
those fiscal years. The Company intends to continue to pursue subscriber account
growth through the Dealer Program and acquisitions. As a result, the Company
will be required to seek additional funding from additional borrowings under the
Revolving Credit Facility and the sale of additional securities in the future,
which may lead to higher leverage or the dilution of then existing holders'
investment in the Common Stock. See "- Risks Related to High Leverage." Any
inability of the Company to obtain funding through external financings is likely
to adversely affect the Company's ability to increase the Company's subscribers,
revenues and earnings before interest, taxes and depreciation and amortization
("EBITDA"). There can be no assurance that external funding will be available to
the Company on attractive terms or at all.
Management of Growth. The Company's business strategy is to grow rapidly
through the addition of subscriber accounts. This expansion has placed and will
continue to place substantial demands on the Company's management and
operational resources. The Company's future operating results will depend in
part on the Company's ability to continue to implement and improve the Company's
operating and financial controls and to expand, train and manage the Company's
employee base. Significant changes in quarterly revenues and costs may result
from the Company's execution of its business strategy, resulting in fluctuating
financial results. Additionally, management of growth may limit the time
available to the Company's management to attend to other operational, financial
and strategic issues.
Attrition of Subscriber Accounts. The Company experiences attrition of
subscriber accounts as a result of, among other factors, relocation of
subscribers, adverse financial and economic conditions, and competition from
other alarm service companies. In addition, the Company loses certain accounts,
particularly acquired accounts, to the extent the Company does not service those
accounts adequately or does not assimilate new accounts into the Company's
operations. An increase in such attrition could have a material adverse effect
on the Company's revenues and earnings.
When acquiring accounts, the Company usually withholds a portion of the
purchase price as a partial reserve against excess subscriber attrition. If the
actual attrition rate for the accounts acquired is greater than the rate assumed
by the Company at the time of the acquisition, and the Company is unable to
recoup its damages from the portion of the purchase price held back from the
seller, such attrition could have a material adverse effect on the Company's
financial condition or results of operations. The Company is not aware of any
reliable historical data relating to account attrition rates prepared by
companies from whom the Company has acquired accounts, and the Company has no
assurance that actual account attrition for acquired accounts will not be
greater than the attrition rate assumed or historically incurred by the Company.
In addition, because some acquired accounts are prepaid on an annual,
semi-annual or quarterly basis, attrition may not become evident for some time
after an acquisition is consummated.
At March 31, 1996, the cost of subscriber accounts and intangible assets,
net of previously accumulated amortization, was $202.2 million, which
constituted approximately 89.3% of the book value of the Company's total assets.
The Company's purchased subscriber accounts are amortized on a straight-line
basis over the estimated life of the related revenues. To estimate such life,
the Company first determines gross subscriber attrition, defined by the Company
for a period as a quotient, the numerator of which is equal to the number of
subscribers who disconnect services during such period and the denominator of
which is the average of the number of subscribers at each month end during such
period. Gross subscriber attrition was 18.2%, 19.6% and 19.3% for fiscal 1993,
1994 and 1995, respectively. The Company offsets gross attrition by adding new
accounts from subscribers who move into premises previously occupied by Company
subscribers and in which security alarm systems are installed ("reconnects"),
conversions of accounts that were previously monitored
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by other alarm companies to the Company's monitoring services ("conversions")
and accounts for which the Company obtains a guarantee from the seller that
provides for the Company to "put" back to the seller canceled accounts
("guaranteed accounts"). The resulting figure is used as a guideline to
determine the estimated life of subscriber revenues. It is the Company's policy
to review periodically actual account attrition and, when necessary, adjust the
remaining estimated lives of the Company's purchased accounts to reflect assumed
future attrition. In fiscal 1993, the Company made such an adjustment to the
estimated life of subscriber accounts, reducing such estimated life from 12
years to 10 years. There could be a material adverse effect on the Company's
results of operations and financial condition if actual account attrition
significantly exceeds assumed attrition and the Company has to make further
adjustments with respect to the amortization of purchased subscriber accounts.
Impact of Accounting Differences for Account Purchases and New
Installations. A difference between the accounting treatment of the purchase of
subscriber accounts (including both purchases of subscriber account portfolios
and purchases under ongoing agreements with independent alarm dealers) and the
accounting treatment of the generation of subscriber accounts through direct
sales by the Company's sales force has a significant impact on the Company's
results of operations. All direct external costs associated with purchases of
subscriber accounts are capitalized and amortized over 10 years on a
straight-line basis. Also included in capitalized costs are certain acquisition
transition costs that reflect the Company's estimate of costs associated with
incorporating the purchased subscriber accounts into the Company's operations.
Such costs include costs incurred by the Company in fulfilling the seller's
pre-acquisition obligations to the acquired subscribers, such as providing
warranty repair services. In contrast, all of the Company's costs related to the
marketing, sales and installation of new alarm monitoring systems generated by
the Company's sales force are expensed in the period in which such activities
occur. The Company's marketing, sales and installation expenses for new systems
generally exceed installation revenues.
The Company's purchase activity increased significantly during fiscal 1994
and 1995. See "-- Risks Related to Acquisitions." In addition, during that
period the Company adopted a strategy of reducing the Company's sales of new
systems and related marketing expenditures. As a result of the difference in the
methods by which such activities are accounted for, the combined effect of these
two factors was to significantly improve operating results during fiscal 1994
and 1995. The Company has not reduced, and does not expect to further reduce,
sales of new systems by Company personnel and related marketing expenditures in
fiscal 1996. There can be no assurance that the Company will not increase its
emphasis on the marketing and sales of new alarm system installations in the
future, which could adversely affect results of operations.
Possible Adverse Effect of "False Alarm" Ordinances. According to certain
data concerning the residential security alarm market prepared in 1995 by J.P.
Freeman & Co. (the "Freeman Data"), approximately 97% of alarm activations that
result in the dispatch of police or fire department personnel are not
emergencies, and thus are "false alarms." Significant concern has arisen in
certain municipalities about this high incidence of false alarms. This concern
could cause a decrease in the likelihood or timeliness of police response to
alarm activations and thereby decrease the propensity of consumers to purchase
or maintain alarm monitoring services.
A number of local governmental authorities have considered or adopted
various measures aimed at reducing the number of false alarms. Such measures
include (i) subjecting alarm monitoring companies to fines or penalties for
transmitting false alarms, (ii) licensing individual alarm systems and the
revocation of such licenses following a specified number of false alarms, (iii)
imposing fines on alarm subscribers for false alarms, (iv) imposing limitations
on the number of times the police will respond to alarms at a particular
location after a specified number of false alarms, and (v) requiring further
verification of an alarm signal before the police will respond. Enactment of
such measures could adversely affect the Company's future business and
operations.
Possible Adverse Effect of Future Government Regulations; Risks of
Litigation. The Company's operations are subject to a variety of laws,
regulations and licensing requirements of federal, state and local authorities.
In certain jurisdictions, the Company is required to obtain licenses or permits,
to comply with standards governing employee selection and training, and to meet
certain standards in the conduct of the
8
<PAGE> 10
Company's business. The loss of such licenses, or the imposition of conditions
to the granting or retention of such licenses, could have a material adverse
effect on the Company.
The Company's advertising and sales practices are regulated by both the
Federal Trade Commission and state consumer protection laws. Such regulations
include restrictions on the manner in which the Company promotes the sale of
security alarm systems and the obligation of the Company to provide purchasers
of alarm systems with certain rescission rights. While the Company believes that
it has complied with these regulations in all material respects, there can be no
assurance that none of these regulations was violated in connection with the
solicitation of the Company's existing subscriber accounts, particularly with
respect to accounts acquired from third parties, or that no such violation will
occur in the future.
From time to time subscribers have submitted complaints to state and local
authorities regarding the Company's sales and billing practices, which in some
instances have resulted in discussions with, or actions by, such authorities. In
August 1994, as a result of certain complaints by subscribers, three California
governmental authorities brought an action against the Company, and concurrently
settled such action. In connection with the settlement of such action, the
Company agreed to the filing of an injunction requiring the Company to provide
notices of certain increases in charges for its services and to comply with
certain restrictions in its marketing, billing and collection activities, and
paid certain restitution to subscribers in the amount of approximately $31,000
and civil penalties of $30,000. Any violation by the Company of the terms of
such injunction could have a material adverse effect on the Company.
The Company does not believe that any of the investigations or actions
described herein has had or will have a material adverse effect on the Company.
However, there can be no assurance that other actions that may be taken in the
future by these or other authorities as a result of subscriber complaints will
not have such an adverse effect on the Company.
Risks of Liability from Operations. The nature of the services provided by
the Company potentially exposes it to greater risks of liability for employee
acts or omissions or system failure than may be inherent in other businesses.
Most of the Company's alarm monitoring agreements and other agreements pursuant
to which the Company sells its products and services contain provisions limiting
liability to subscribers in an attempt to reduce this risk. However, in the
event of litigation with respect to such matters there can be no assurance that
these limitations will be enforced, and the costs of such litigation could have
an adverse effect on the Company.
The Company's alarm response and patrol services require Company personnel
to respond to emergencies that may entail risk of harm to such employees and to
others. In most cities in which the Company provides such services, the
Company's patrol officers carry firearms, which may increase such risk. Although
the Company screens and trains its employees, the provision of alarm response
service subjects the Company to greater risks related to accidents or employee
behavior than other types of businesses. Reduction of police participation in
the handling of emergencies could expose the Company's patrol officers to
greater hazards and further increase the Company's risk of liability.
The Company carries insurance of various types, including general liability
and errors and omissions insurance providing coverage of $15.0 million on both
an aggregate and a per claim basis. The loss experience of the Company and other
security service companies may affect the availability and cost of such
insurance. Certain of the Company's insurance policies and the laws of some
states may limit or prohibit insurance coverage for punitive or certain other
types of damages, or liability arising from gross negligence.
Geographic Concentration. The Company's existing subscriber base is
geographically concentrated in certain metropolitan areas and surrounding
suburbs, including Phoenix, Arizona; Bakersfield, Los Angeles, San Diego and San
Francisco, California; Las Vegas, Nevada; Portland, Oregon; and Seattle,
Washington. Accordingly, the performance of the Company may be adversely
affected by regional or local economic conditions.
The Company may from time to time make acquisitions in regions outside of
the Company's current operating area. The acquisition of subscriber accounts in
other regions, or in metropolitan areas in which the Company does not currently
have subscribers, requires an investment by the Company in local branches and
9
<PAGE> 11
personnel necessary to service such accounts. In order for the Company to expand
successfully into a new area, the Company must obtain a sufficient number, and
density, of subscriber accounts in such area to support the additional
investment. There can be no assurance that an expansion into new geographic
areas would generate operating profits.
Competition. The security alarm industry is highly competitive and highly
fragmented. The Company competes with larger national companies, as well as
smaller regional and local companies, in all of the Company's operations.
Furthermore, new competitors are continuing to enter the industry and the
Company may encounter additional competition from such future industry entrants.
In addition, as a result of a 1991 modification to the court order that led to
the division of AT&T Corp. into the regional Bell system, the seven regional
Bell operating companies are not prohibited from entering the information
services industry, which includes the electronic security services industry. One
of such companies, Ameritech Corp., has acquired several security monitoring
businesses, including The National Guardian Corporation, which had approximately
275,000 subscribers at the time of the acquisition.
Certain of the Company's current competitors have, and new competitors may
have, greater financial resources than the Company. In addition, other alarm
services companies have adopted a strategy similar to the Company's that entails
the aggressive purchase of alarm monitoring accounts both through acquisitions
of account portfolios and through dealer programs. Some of these companies may
be willing to offer higher prices than the Company is prepared to offer to
purchase subscriber accounts. The effect of such competition may be to reduce
the purchase opportunities available to the Company, thus reducing the Company's
rate of growth, or to increase the price paid by the Company for subscriber
accounts, which would adversely affect the Company's return on investment in
such accounts and the Company's results of operations.
Dependence Upon Senior Management. The success of the Company's business is
largely dependent upon the active participation of the Company's executive
officers. The loss of the services of one or more of such officers for any
reason may have a material adverse effect on the Company's business.
Significant Ownership of Shares by Certain Stockholders. As of the date of
this Prospectus, three investment funds managed or advised by Patricof & Co.
Ventures, Inc. ("Patricof") beneficially own approximately 20.4% of the
outstanding shares of Common Stock, and one director of Protection One is an
officer of Patricof. As a result, these investors currently have the ability to
significantly influence the outcome of matters submitted for approval of the
stockholders of Protection One (including the election of directors and any
merger, consolidation or sale of all or substantially all of Protection One's
assets) and the affairs of the Company generally.
Effect of Change of Control; Delaware Anti-takeover Law. Monitoring is
required to make an offer to purchase all of the Discount Notes at a price equal
to 101% of their Accreted Value (as defined in the Indenture) on any repurchase
date prior to June 30, 1998, or at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest to any repurchase date
on or after June 30, 1998, upon the occurrence of any "change of control" as
defined in the Indenture. A "change of control" also constitutes an event of
default under the Revolving Credit Facility. If such a triggering event were to
occur, the Company may not be able to repay all of its obligations that would
then become payable. Such provisions, together with certain provisions of
Delaware law, could delay or prevent a change in control of the Company, could
discourage acquisition proposals and could diminish the opportunities for a
stockholder to participate in tender offers, including tender offers at a price
above the then current market value of the Common Stock or over a stockholder's
cost basis in the Common Stock. In addition, the Board of Directors of
Protection One (the "Board of Directors"), without further stockholder approval,
may issue preferred stock, which could have the effect of delaying, deferring or
preventing a change in control of the Company. The issuance of preferred stock
could also adversely affect the voting power of the holders of Common Stock,
including the loss of voting control to others.
Possible Volatility of Stock Price. The stock market has from time to time
experienced extreme price and volume fluctuations that have been unrelated to
the operating performance of particular companies. The market price of the
Common Stock may be significantly affected by quarterly variations in the
Company's operating results, changes in financial estimates by securities
analysts or failures by the Company to meet such
10
<PAGE> 12
estimates, litigation involving the Company, general trends in the security
alarm industry, actions by governmental agencies, national economic and stock
market conditions, industry reports and other factors, many of which are beyond
the control of the Company.
THE ACQUISITION
Pursuant to an Agreement for Purchase and Sale of Stock dated as of May 23,
1996 (the "Purchase Agreement"), by and among Monitoring, Protection One, the
Selling Stockholders and Metrol, on June , 1996, Monitoring acquired all of
the outstanding shares of capital stock of Metrol Security Services, Inc. (the
"Metrol Stock"). As partial payment for the Metrol Stock, Protection One issued
an aggregate of shares of Common Stock to the Selling Stockholders. The
Registration Statement of which this Prospectus is a part has been filed
pursuant to the Purchase Agreement and the related registration rights agreement
between the Company and the Selling Stockholders.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Shares by the
Selling Stockholders.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Protection One consists of 24,000,000
shares of Common Stock and 5,000,000 shares of preferred stock, par value $.10
per share ("Preferred Stock").
COMMON STOCK
As of May 28, 1996, there were 12,306,450 shares of Common Stock issued and
outstanding.
Each share of Common Stock entitles the holder of record thereof to cast
one vote on all matters submitted for a vote of stockholders. The holders of
Common Stock do not possess cumulative voting rights, and members of the Board
of Directors are elected by a plurality vote. As a result, the holders of a
majority of outstanding shares of Common Stock voting for the election of
directors can elect all directors then being elected.
Each share of Common Stock has an equal and ratable right to receive such
dividends as may be declared by the Board of Directors out of funds legally
available therefor, subject to the rights of the holder(s) of any one or more
series of Preferred Stock then outstanding.
Upon the liquidation, dissolution or winding up of Protection One, the
assets of Protection One legally available for distribution to stockholders are
distributable equally and ratably among the holders of Common Stock, subject to
prior distribution rights of creditors of the Company and to the preferential
rights of the holders of any one or more series of Preferred Stock then
outstanding.
The holders of shares of Common Stock have no preemptive, subscription,
redemption or conversion rights and are not liable for further calls or
assessments. All of the outstanding shares of Common stock are fully paid and
nonassessable.
The Transfer Agent and Registrar for the Common Stock is First Interstate
Bank of Oregon, N.A., Seattle, Washington.
PREFERRED STOCK
Protection One is authorized to issue up to an aggregate of 5,000,000
shares Preferred Stock in such series and with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue Preferred Stock with dividend, liquidation, conversion, voting or other
rights that could adversely affect the voting power or other rights of the
holders of the Common Stock. In the event of such issuance, the Preferred
11
<PAGE> 13
Stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of Protection One. As
of the date of this Prospectus, there are no shares of Preferred Stock
outstanding, and Protection One has no present intention to issue any additional
such shares.
DELAWARE ANTI-TAKEOVER LAW
Protection One is a Delaware corporation and is subject to Section 203 of
the Delaware General Corporation Law. Pursuant to Section 203, certain "business
combinations" (as defined) between a Delaware corporation and an "interested
stockholder" (defined generally as a stockholder who becomes the beneficial
owner of 15% or more of a Delaware corporation's outstanding voting stock) are
prohibited for three years following the date such stockholder became an
interested stockholder, unless: (i) the corporation has elected in its
certificate of incorporation not to be governed by Section 203; (ii) the
business combination or the transaction in which the interested stockholder
became an interested stockholder was approved by the corporation's board of
directors before the other party to the business combination became an
interested stockholder; (iii) upon consummation of the transaction that resulted
in the interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding voting stock owned
by directors who are also officers of the corporation or held in employee
benefit plans that do not provide employees a confidential right to determine
whether to tender (or how to vote) stock held by the plan; or (iv) the business
combination was approved by the board of directors of the corporation and by the
holders of two-thirds of the outstanding voting stock of the corporation not
owned by the interested stockholder. The three-year prohibition also does not
apply to certain business combinations proposed by an interested stockholder
following the announcement or notification of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of a majority of the corporation's directors. The
term "business combination" is defined generally to include mergers or
consolidations between a Delaware corporation and an "interested stockholder,"
transactions with an "interested stockholder" involving the assets or stock of
the corporation or its majority-owned subsidiaries and transactions that
increase an interested stockholder's percentage ownership of stock. The
provisions of Section 203 requiring a "supermajority" vote to approve certain
corporate transactions could enable certain of the Company's stockholders to
exercise veto power over such transactions.
12
<PAGE> 14
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
number of shares of Common Stock beneficially owned by the Selling Stockholders
as of June , 1996, the number of shares to be offered by the Selling
Stockholders pursuant to this Prospectus and the number and percentage of
outstanding shares of Common Stock to be owned by each Selling Stockholder if
all of the shares offered hereby are sold as described herein:
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF SHARES NUMBER NUMBER OF OF OUTSTANDING
OWNED PRIOR OF SHARES SHARES OWNED SHARES OWNED
SELLING STOCKHOLDER TO OFFERING BEING OFFERED AFTER OFFERING AFTER OFFERING
------------------- ---------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
The Buckey Family Trust
Sandler Mezzanine
Partners, L.P.
Sander Mezzanine
T-E Partners, L.P.
Sandler Mezzanine
Foreign Partners, L.P.
Steven Wheeler
Galbri Holding, Inc.
Collins Family Partnership
Martin C. Madden
Arnold Zousmer
Jack Kadis
BHI Associates IX, L.P.
</TABLE>
- ---------------
* Less than one percent.
The preceding table has been prepared based upon information furnished to
the Company by or on behalf of the Selling Stockholders. Other than as a
stockholder of Metrol prior to the Acquisition, none of the Selling Stockholders
listed above had any material relationship with the Company within the
three-year period ending on the date of this Prospectus. To the extent required
by applicable law, the Company may amend or supplement this Prospectus from time
to time to disclose the names, relationships to the Company and holdings of
Common Stock of additional Selling Stockholders or to update the disclosure set
forth herein.
PLAN OF DISTRIBUTION
The Selling Stockholders may from time to time sell the shares covered by
this Prospectus in one or more of the following transactions: (a) to
underwriters who will acquire the shares for their own account and resell such
shares in one or more transactions, including negotiated transactions, at a
fixed price or at varying prices determined at the time of sale, with any
initial public offering price and any discount or concession allowed or
re-allowed or paid to dealers subject to change from time to time, (b) through
brokers or dealers, acting as principal or agent, in transactions (which may
involve block transactions) on the Nasdaq National Market in ordinary brokerage
transactions, in negotiated transactions or otherwise, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or otherwise (including without limitation sales in
transactions that comply with the volume and manner of sale provisions contained
in paragraphs (e) and (f) of Rule 144 under the Securities Act ("Rule 144")) or
(c) directly or indirectly through brokers or agents in private sales at
negotiated prices, or in any combination of such methods of sale.
In connection with distributions of the shares of Common Stock covered
hereby or otherwise, the Selling Stockholders may enter into hedging
transactions with broker-dealers or other financial institutions. In connection
with such transactions, broker-dealers or other financial institutions may
engage in short sales of Common Stock in the course of hedging the positions
they assume with Selling Stockholders. The Selling Stockholders may also sell
Common Stock short and redeliver the shares to close out such short positions.
The Selling Stockholders may also enter into option or other transactions with
broker-dealers or other financial
13
<PAGE> 15
institutions which require the delivery to such broker-dealer or other financial
institution of the Common Stock offered hereby, which Common Stock such
broker-dealer or other financial institution, subject to any applicable transfer
restrictions in agreements between the Selling Stockholders and the Company, may
resell pursuant to this Prospectus (as supplemented or amended to reflect such
transaction). The Selling Stockholders may also pledge the shares registered
hereunder to a broker-dealer or other financial institution and, upon a default,
such broker-dealer or other financial institution may, subject to any applicable
transfer restrictions in agreements between the Selling Stockholder and the
Company, effect sales of the pledged Common Stock pursuant to this Prospectus
(as supplemented or amended to reflect such transaction). In addition, any
securities covered by this Prospectus that qualify for sale pursuant to Rule 144
may be sold under Rule 144 rather than pursuant to this Prospectus.
Underwriters participating in any offering may receive underwriting
discounts and commissions and discounts or concessions may be allowed or
re-allowed or paid to dealers, and brokers or agents participating in such
transactions may receive brokerage or agent's commissions or fees.
In effecting sales of the Shares, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive compensation in the form of commissions or discounts from
Selling Stockholders in amounts to be negotiated, including immediately prior to
the sale. The Selling Stockholders and all brokers, dealers or agents, if any,
who participate in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any profits on the sale of such shares by such stockholders, and all
discounts, commissions or concessions received by such dealers or agents, if any
(whether received from the Selling Stockholders and/or from the purchasers of
the Shares for whom those dealers or agents may act as agents), may be deemed to
be underwriting discounts and commissions under the Securities Act.
Certain of the above-described underwriters, dealers, brokers or agents may
have other business relationships with the Company and its affiliates in the
ordinary course of business.
Upon Protection One being notified by a Selling Stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
Shares through a block trade, special offering or secondary distribution or a
purchase by a broker-dealer, to the extent required by applicable law, a
supplement to this Prospectus will be distributed that will set forth the name
of each such Selling Stockholder, and of the participating underwriters,
broker-dealer(s) or agents, the aggregate amount of Shares being offered and the
terms of the offer, including all discounts, commissions and other items
constituting compensation from the Selling Stockholders, if any, and all
discounts, commissions or concessions allowed or re-allowed or paid to dealers,
if any.
The Selling Stockholders and other persons participating in the
distribution of the Shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations of the Commission thereunder,
including, without limitation, Rules 10b-2, 10b-5, 10b-6 and 10b-7, which
provisions may limit the timing of the purchase and sale of shares of Common
Stock by the Selling Stockholders.
Protection One will pay all of the expenses incident to this offering,
other than commissions and fees of third parties employed by a Selling
Stockholder, including attorneys' fees. The Company has agreed to indemnify the
Selling Stockholders and any and all broker-dealers they may utilize against
certain civil liabilities, including liabilities under the Securities Act, that
may arise in connection with their distribution of Shares.
LEGAL MATTERS
The validity of the Shares has been passed upon for Protection One by
Mitchell, Silberberg & Knupp LLP, Los Angeles, California, counsel for
Protection One.
14
<PAGE> 16
EXPERTS
The consolidated audited financial statements and financial statement
schedules of the Company as of September 30, 1995, 1994 and 1993, and for each
of the three years in the period ended September 30, 1995, incorporated in this
Prospectus by reference to the Company's Annual Report on Form 10-K for the year
ended September 30, 1995, as amended, have been incorporated herein in reliance
upon the reports of Coopers & Lybrand L.L.P., independent accountants, given on
the authority of that firm as experts in accounting and auditing.
15
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
NATURE OF EXPENSE
-----------------
<S> <C>
SEC Registration Fee........................................ $2,225.17
Legal (including blue sky) fees and expenses................ 3,000.00
Accounting fees and expenses................................ 2,000.00
Miscellaneous............................................... 2,500.00
---------
Total............................................. $9,725.17
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS OF AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
provides that a corporation has the power to indemnify a director, officer,
employee or agent of the corporation and certain other persons serving at the
request of the corporation in related capacities against amounts paid and
expenses incurred in connection with an action or proceeding to which he is or
is threatened to be made party by reason of such position, if such person shall
have acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, in any criminal
proceeding, if such person had no reasonable cause to believe his conduct was
unlawful, provided that, in the case of actions brought by or in the right of
the corporation, no indemnification shall be made with respect to any matter as
to which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the adjudicating court determines that such
indemnification is proper under the circumstances. The Registrant's Certificate
of Incorporation provides that the Registrant shall indemnify its directors and
officers to the fullest extent permitted by the Delaware General Corporation
Law.
The Registrant's Certificate of Incorporation also provides that no
director shall be liable to the Registrant or its stockholders for monetary
damages for breach of his fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Registrant or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law or (iv) for any transaction in which the
director derived an improper personal benefit.
The By-laws of the Registrant contain provisions to the effect that each
director, officer and employee of the Registrant shall be indemnified by the
Registrant against liabilities and expenses in connection with any legal
proceedings to which he may be made a party or with which he may become involved
or threatened by reason of having been an officer, director or employee of the
company or of any other organization at the request of the company. The
provisions include indemnification with respect to matters covered by a
settlement. Under Delaware law, any such indemnification shall be made only if
the Board determines by a majority vote of a quorum consisting of disinterested
directors (or, if such quorum is not obtainable, or if the Board of Directors
directs, by independent legal counsel) or by stockholders, that indemnification
is proper in the circumstances because the person seeking indemnification has
met the applicable standards of conduct. In addition, it must be determined that
the director, officer or employee acted in good faith with the reasonable belief
that his action was in or not opposed to the best interests of the company, and,
with respect to any criminal action or proceeding, that he had no reasonable
cause to believe his conduct was unlawful.
II-1
<PAGE> 18
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<C> <S>
2.1 Agreement for Purchase and Sale of Assets dated as of May 23, 1996, among Metrol
Security Services, Inc. and, inter alia, Protection One Alarm Monitoring, Inc. and
Protection One, Inc.*
4.1 Fifth Amended and Restated Certificate of Incorporation of Protection One, Inc.(1)
4.2 Bylaws of Protection One, Inc.(2)
5.1 Opinion of Mitchell, Silberberg & Knupp LLP*
23.1 Consent of Coopers & Lybrand L.L.P.*
23.2 Consent of Mitchell, Silberberg & Knupp LLP (included in Exhibit 5.1)*
24.1 Power of attorney (included on signature page)
</TABLE>
- ---------------
* To be filed by amendment.
(1) Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K
for the year ended September 30, 1994, filed by Protection One, Inc.
(2) Incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form
10-Q filed by Protection One, Inc. for the quarter ended March 31, 1996.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
provided, however, that paragraphs (1)(i) and (1) (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") that are incorporated by reference in
this Registration Statement.
(2) That, for the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at the
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 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 this
Registration Statement shall be deemed to be a new
II-2
<PAGE> 19
registration statement relating to the securities offered therein and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the indemnification provisions described herein, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant 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 whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies hat is has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Beaverton, State of Oregon, on June 12, 1996.
PROTECTION ONE, INC.
By: /s/ JOHN W. HESSE
--------------------------------------
John W. Hesse
Executive Vice President
and Chief Financial Officer
SIGNATURES AND POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints James M.
Mackenzie, Jr. and John W. Hesse, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
re-substitution in each of them, for him and in his name, place and stead, and
in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement on Form S-3 of
Protection One, Inc. and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them or their or his
substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES M. MACKENZIE, JR. President, Chief Executive June 12, 1996
- --------------------------------------------- Officer and Director
James M. Mackenzie, Jr.
/s/ JOHN W. HESSE Executive Vice President, June 12, 1996
- --------------------------------------------- Chief Financial Officer
John W. Hesse (principal financial officer)
and Secretary
/s/ ROBERT M. CHEFITZ Director June 12, 1996
- ---------------------------------------------
Robert M. Chefitz
/s/ BEN ENIS Director June 12, 1996
- ---------------------------------------------
Ben Enis
</TABLE>
II-4
