SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ]
Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for
Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ X] Definitive
Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material
Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
PROTECTION ONE, INC.
(Name of Registrant as Specified In Its Charter)
PROTECTION ONE, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
...............................................................
2) Aggregate number of securities to which transaction applies:
...............................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: 1
.............................................................
4) Proposed maximum aggregate value of transaction:
..............................................................
5) Total fee paid:
..............................................................
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
..............................................................
2) Form, Schedule or Registration Statement No.:
..............................................................
3) Filing Party:
..............................................................
4) Date Filed:
..............................................................
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PROTECTION ONE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Protection One, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders
(the "Meeting") of Protection One, Inc., a Delaware corporation (the "Company"),
will be held at 8:00 a.m., Central Time, on Thursday, April 23, 1998 at the Four
Seasons Hotel, 4150 N. MacArthur Blvd., Irving, Texas 75038, for the following
purposes, all as set forth in the attached Proxy Statement:
(1) To elect twelve directors; and
(2) To transact such other business as may properly come before the
Meeting.
The Board of Directors has fixed the close of business on March 27,
1998 as the record date for the determination of stockholders entitled to
receive notice of, and to vote at, the Meeting and any and all adjournments
thereof.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, WHETHER OR NOT YOU EXPECT TO ATTEND, YOU ARE URGED TO READ THE ATTACHED
PROXY STATEMENT AND TO ASSURE YOUR REPRESENTATION AT THE MEETING BY COMPLETING,
SIGNING, DATING AND RETURNING THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE.
AN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES OR CANADA,
IS INCLUDED FOR YOUR CONVENIENCE. IF YOU RECEIVE MORE THAN ONE PROXY CARD
BECAUSE YOU OWN SHARES REGISTERED IN DIFFERENT NAMES OR AT DIFFERENT ADDRESSES,
EACH PROXY CARD SHOULD BE COMPLETED, SIGNED AND RETURNED.
By Order of the Board of Directors
John W. Hesse
Executive Vice President
and Secretary
April 2, 1998
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PROTECTION ONE, INC.
6011 Bristol Parkway
Culver City, California 90230
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To be Held on April 23, 1998
This Proxy Statement is furnished to holders of shares of the Common
Stock, par value $.01 per share ("Common Stock"), of Protection One, Inc., a
Delaware corporation (the "Company" or "Protection One"), in connection with the
solicitation of proxies by the Board of Directors of the Company from holders of
the Common Stock for use at the 1998 Annual Meeting of Stockholders of the
Company (the "Meeting"), for the purposes set forth in the foregoing notice of
the Meeting, and at any and all adjournments of the Meeting. The Meeting will be
held at 8:00 a.m., Central Time, on Thursday, April 23, 1998, at the Four
Seasons Hotel, 4150 N. MacArthur Blvd., Irving, Texas 75038.
This Proxy Statement and the enclosed proxy are first being mailed or
otherwise released to stockholders entitled to vote at the Meeting on or about
April 2, 1998. The Company's audited financial statements, together with the
report thereon of Arthur Andersen LLP and certain other information concerning
the Company, are included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, a copy of which is being mailed with this Proxy
Statement.
The Board of Directors requests that you complete, sign, date and
return the enclosed proxy promptly, regardless of whether you plan to attend the
Meeting. Any stockholder attending the Meeting may vote in person, even though
he or she previously has returned a proxy.
The date of this Proxy Statement is April 2, 1998.
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INTRODUCTION
Matters to Be Considered
At the Meeting, the stockholders of the Company will vote upon (i) the
election of twelve directors to serve for one year and until their successors
have been elected and shall have qualified; and (ii) such other business as may
properly come before the Meeting. The Board of Directors does not know of any
matter to be presented at the Meeting other than the election of directors
described in this Proxy Statement.
Voting Rights and Votes Required
The Board of Directors has fixed the close of business on March 27,
1998 as the date (the "Record Date") for the determination of stockholders
entitled to notice of, and to vote at, the Meeting. At the close of business on
the Record Date, 83,766,369 shares of Common Stock were outstanding.
A majority of the outstanding shares of Common Stock must be
represented in person or by proxy at the Meeting in order to constitute a quorum
for the transaction of business. Abstentions and shares held by a broker or
other nominee holding shares for a beneficial owner that are not voted on a
particular proposal because the nominee does not have discretionary voting power
with respect to that proposal and has not received instructions from the
beneficial owner (a "broker non-vote") will be counted as present for purposes
of determining the presence of a quorum for the Meeting.
Each holder of record of Common Stock on the Record Date is entitled to
one vote for each share of Common Stock so held on each matter to be voted upon
at the Meeting.
The twelve directors to be elected at the Meeting will be elected by
the affirmative vote of the holders of a plurality of the shares of Common Stock
represented at the Meeting in person or by proxy. Because the twelve directors
will be elected by a plurality vote (i.e., the twelve persons receiving the
highest number of favorable votes will be elected) and assuming such election is
uncontested, votes withheld from any one or more nominees and broker non-votes
will not have any effect on the outcome of the election of directors.
Action with respect to any other matter that may properly come before
the Meeting will require the affirmative vote of the holders of a majority of
the shares of Common Stock represented at the Meeting in person or by proxy and
entitled to vote on the matter. Abstentions will be counted in determining the
total number of shares present and entitled to vote on any such proposal.
Accordingly, although not counted as a vote "for" or "against" a proposal, an
abstention on any such proposal will have the same effect as a vote "against"
that proposal. Broker non-votes will not be counted in determining the number of
shares present and entitled to vote on any such proposal, and will have no
effect on the outcome.
Solicitation, Voting and Revocation of Proxies
In connection with the solicitation by the Board of Directors of
proxies for use at the Meeting, the Board of Directors has designated John W.
Hesse and Steven A. Millstein as proxies. Shares of Common Stock represented by
proxies in the accompanying form, properly executed, received prior to the
Meeting and not revoked, will be voted at the Meeting in accordance with the
instructions specified thereon. IF NO INSTRUCTIONS ARE SPECIFIED, SHARES OF
COMMON STOCK REPRESENTED BY ANY SUCH PROXY WILL BE VOTED FOR THE ELECTION OF
EACH OF THE NOMINEES IDENTIFIED BELOW AND IN ACCORDANCE WITH THE BEST JUDGMENT
OF THE PERSONS DESIGNATED AS PROXIES WITH REGARD TO ALL OTHER MATTERS, IF ANY,
THAT MAY BE PRESENTED AT THE MEETING AND MATTERS INCIDENT TO THE CONDUCT OF THE
MEETING. The Board of Directors is not aware of any matter that will come before
the Meeting other than as described above.
A stockholder may revoke his or her proxy at any time prior to its
exercise by filing with the Secretary of the Company at its principal executive
offices at 6011 Bristol Parkway, Culver City, California 90230 a notice of
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revocation or a duly executed proxy bearing a later date, or by attending the
Meeting and voting in person. Attendance at the Meeting will not, in itself,
constitute revocation of a previously granted proxy.
In the event that the votes necessary to approve a proposal have not
been obtained by the date of the Meeting, the chairman of the Meeting may, in
his discretion, adjourn the Meeting from time to time to permit the solicitation
of additional proxies by the Board of Directors.
The costs of this solicitation, including expenses in connection with
preparing and mailing this Proxy Statement and the enclosed proxy, will be paid
by the Company. The Company will reimburse persons holding shares of Common
Stock in their names or the names of their nominees but not owning such shares
beneficially (such as brokerage firms, banks and other fiduciaries) for their
expenses in forwarding soliciting materials to such beneficial owners.
CHANGE IN CONTROL OF THE COMPANY
On July 30, 1997, the Company and Western Resources, Inc. ("Western
Resources") entered into a Contribution Agreement (as amended, the "Contribution
Agreement"). Pursuant to the Contribution Agreement, on November 24, 1997 (the
"Acquisition Date"), the Company issued to Western Resources an aggregate of
68,673,402 shares of Common Stock, which shares represented 82.4% of the shares
of Common Stock outstanding immediately after such issuance. In consideration
for the issuance of such shares to Western Resources, Western Resources
transferred to the Company all of the outstanding stock of WestSec, Inc. and
Westar Security, Inc., which companies conducted the security alarm monitoring
business of Western Resources, and an aggregate of $367.4 million in cash and
securities. The cash portion of such consideration was funded with Western
Resources' working capital.
In connection with this transaction, the Company also granted to
Western Resources the option to purchase up to 2,750,238 additional shares of
Common Stock at a price of $15.50 per share (the "Western Option"). Western
Resources' right to exercise the Western Option will terminate on the earlier of
(a) October 31, 1999 or (b) the 45th day after the last day on which any of the
6 3/4% Convertible Senior Subordinated Notes due 2003 ("Convertible Notes")
issued by Protection One Alarm Monitoring, Inc., a wholly-owned subsidiary of
the Company, remain outstanding.
Pursuant to action taken by the Board of Directors of the Company on
July 30, 1997 but effective on the Acquisition Date, the Company changed its
fiscal year end from September 30 to December 31.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information with respect to
Western Resources' beneficial ownership of the Common Stock as of March 27,
1998. No other person is known to the Company to beneficially own more than 5%
of the outstanding Common Stock.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
Western Resources, Inc. 73,116,195 (1)(2)(3) 83.0%
818 S. Kansas Avenue
Topeka, KS 66612
(1) Includes 2,750,238 shares issuable upon exercise of the Western Option
and 1,541,555 shares issuable upon conversion of $17,250,000 aggregate
principal amount of Convertible Notes held by Western Resources.
(2) Western Resources has sole voting power and sole investment power with
respect to these shares.
(3) The record owner of the outstanding shares is Westar Capital, Inc.,
a wholly-owned subsidiary of Western Resources.
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ELECTION OF DIRECTORS
Nominees for Election
Twelve directors will be elected at the Meeting, each to serve until
the next annual meeting of the Company's stockholders and until his or her
successor has been duly elected and qualified.
The Contribution Agreement provides that (i) until the second
anniversary of the Acquisition Date, Western Resources will vote all shares of
Common Stock beneficially owned by Western Resources to elect as directors of
Protection One the four persons who were serving as directors of Protection One
at the Acquisition Date, and eight individuals nominated by Western Resources
(some or all of whom may be, at Western Resources' sole discretion, "independent
persons" as defined in the Contribution Agreement); and (ii) thereafter, for so
long as Western Resources directly or indirectly owns more than 50% of the
outstanding shares of Common Stock, Western Resources will vote all such shares
to elect as directors of Protection One an individual selected by Western
Resources from the executive officers of Protection One, at least three
"Independent Directors" (as defined in the Contribution Agreement) and eight
additional individuals nominated by Western Resources. As indicated under
"Change in Control of the Company" above, Western Resources beneficially owns in
excess of 80% of the outstanding shares of Common Stock entitled to vote at the
Meeting. Accordingly, the vote by Western Resources of such shares in the
election of directors of the Company will result in the election of all the
nominees listed below, regardless of how any other stockholders may vote.
The persons recommended by the Board of Directors for election as
directors at the Meeting are James M. Mackenzie, Jr., Robert M. Chefitz,
Ben M. Enis, and James Q. Wilson, each of whom was serving as a director of
Protection One at the Acquisition Date, and Peter C. Brown, Howard A.
Christensen, Joseph J. Gardner, William J. Gremp, Steven L. Kitchen, Carl M.
Koupal, Jr., John C. Nettels, Jr., and Jane Dresner Sadaka, each of whom was
nominated by Western Resources and became a director of Protection One on the
Acquisition Date.
Each of the nominees for director has consented to being named as a
nominee in this Proxy Statement and to serve if elected. Although the Board of
Directors does not know of any reason why any of the Board's nominees will be
unavailable for election, in the event any such nominee should be so unavailable
at the time of the Meeting, proxies in the accompanying form will be voted for
the election of the balance of those nominees named and such other person as the
Board of Directors shall select in accordance with the provisions of the
Contribution Agreement described above.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF
THE NOMINEES LISTED BELOW AS A DIRECTOR OF THE COMPANY.
Certain information concerning each of the persons proposed by the
Board of Directors for election at the Meeting as a director is set forth below:
Position(s) with
Name Age the Company
James M. Mackenzie, Jr. 50 President, Chief Executive
Officer and Director
Peter C. Brown 39 Director
Robert M. Chefitz 38 Director
Howard A. Christensen 64 Director
Ben M. Enis 56 Director
Joseph J. Gardner 60 Director
William J. Gremp 55 Director
Steven L. Kitchen 52 Director
Carl M. Koupal, Jr. 44 Director
John C. Nettels, Jr. 41 Director
Jane Dresner Sadaka 44 Director
James Q. Wilson 66 Director
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<PAGE>
James M. Mackenzie, Jr. has been President and Chief Executive Officer
and a director of the Company since 1991.
Peter C. Brown has served as President of AMC Entertainment, Inc., an
entertainment company ("AMCE"), since January 1997. He served as Executive Vice
President of AMCE from August 1994 to January 1997, and has served as AMCE's
Chief Financial Officer since November 1991. Mr. Brown currently serves as
director of AMCE and is Chairman of the Board of Trustees of Entertainment
Properties Trust, a recently formed real estate investment trust.
Robert M. Chefitz has been a director of Protection One since September
1991. Mr. Chefitz joined Patricof & Co. Ventures, Inc. ("Patricof"), an
investment management firm, in 1987, where he currently serves as a Managing
Director. Mr. Chefitz also serves as a general partner to various venture
capital partnerships managed by Patricof. Mr. Chefitz currently serves on the
Board of Directors of Xpedite Systems, Inc. and is also a director of several
private companies.
Howard A. Christensen is President and Chief Executive Officer of
Christensen & Associates, an investor relations and strategic planning firm.
Ben M. Enis has been a director of Protection One since October 1994.
He has been a Professor of Marketing at the University of Southern California
since 1982. Mr. Enis currently serves on the Board of Directors of Countrywide
Credit Industries, Inc.
Joseph J. Gardner is the President of Condev Properties, a real estate
investment and development company.
William J. Gremp has been Senior Vice President and Managing Director
of the Utilities and Strategic Finance Group of First Union Capital Markets
Group, a banking firm, since April 1996. Prior to that time, he was a Managing
Director in the Global Power Group at Chase Manhattan Bank. Mr. Gremp is also
a director of St. Joseph Light & Power Company.
Steven L. Kitchen is an Executive Vice President and the Chief
Financial Officer of Western Resources. He is also a director of Oneok, Inc.,
a natural gas company.
Carl M. Koupal, Jr. has been an Executive Vice President and the Chief
Administrative Officer for Western Resources since July 1995. From January 1995
to July 1995, Mr. Koupal was Executive Vice President of Corporate
Communications, Marketing and Economic Development for Western Resources. Prior
to that time, he served as Western Resources' Vice President, Corporate
Marketing, and Economic Development. Mr. Koupal also currently serves as a
director of Hanover Compressor Co.
John C. Nettels, Jr. is a partner in the law firm of Morrison & Hecker
L.L.P.
Jane Dresner Sadaka is an Advisory Board Member of DLJ Merchant Banking
Fund II. She served as a Special Limited Partner of Kellner, DiLeo & Co., a
broker-dealer, from 1992 until 1997, and prior to that time was a General
Partner, Head of Research, for Kellner, DiLeo & Co. Ms. Sadaka is also Executive
Vice President of the New York University School of Business Alumni Association.
James Q. Wilson has been a director of Protection One since June 1996.
Mr. Wilson has recently retired from his position as a Professor of Management
at the University of California at Los Angeles. Mr. Wilson is currently a
director of New England Electric System and State Farm Mutual Life Insurance
Company.
Committees of the Board of Directors; Board and Committee Meetings
The Board of Directors has a Compensation Committee and an Audit
Committee. The members of the Compensation Committee are John C. Nettels, Jr.,
Joseph J. Gardner, Howard A. Christensen and Carl M. Koupal, Jr., all of whom
were appointed by the Board of Directors effective as of January 26, 1998.
The Compensation
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Committee establishes, subject to approval by the Board of Directors, the
salaries and bonuses for executive officers of the Company, and together with
the Board of Directors administers the Company's long-term incentive, stock
purchase and 401(k) plans. The members of the Audit Committee are Peter C.
Brown, James Q. Wilson, Steven L. Kitchen and William J. Gremp. The Audit
Committee selects, subject to approval by the Board of Directors, independent
public accountants to audit the consolidated financial statements of the Company
and its subsidiaries and reviews the results and scope of the audits and other
services provided by the Company's independent auditors. The Board of Directors
does not currently have a nominating committee.
During the year ended December 31, 1997, the Board of Directors held
eleven meetings and acted once by written consent, and each of the Compensation
Committee and the Audit Committee held two meetings. Each director attended
at least 75% of the aggregate of the meetings of the Board of Directors and of
the committees of the Board of which he or she was a member.
Director Compensation. All non-employee directors of Protection One
(other than Mr. Kitchen and Mr. Koupal, who are employees of Western Resources)
will receive for their services as directors an annual fee of $15,000 and an
additional fee of $750 per in-person meeting (or $500 per telephonic meeting)
of the Board or committees thereof attended. Prior to the Acquisition Date,
each of Mr. Chefitz, Mr. Enis and Mr. Wilson received a fee of $10,000 per year
as compensation for his services as a director. Mr. Chefitz's fees are paid to
Patricof.
On March 20, 1997, Mr. Enis was granted an option to acquire 18,000
shares of Common Stock, Mr. Wilson was granted an option to acquire 14,000
shares of Common Stock and Patricof (in respect of Mr. Chefitz) was granted an
option to acquire 30,000 shares of Common Stock. Each of such options has an
exercise price of $9.50 per share and a 10-year term and became exercisable in
full on the Acquisition Date. On January 26, 1998, pursuant to the Company's
long-term incentive plan, each non-employee director (other than Mr. Kitchen and
Mr. Koupal) received an option to acquire 2,500 shares of Common Stock. Each
such option has a term of 10 years, will vest in full on the third anniversary
of the grant date and has an exercise price equal to the closing price of the
Common Stock as reported on the Nasdaq National Market on the date granted. The
option that otherwise would have been granted to Mr. Chefitz was granted to
Patricof.
All directors are reimbursed for travel and other out-of-pocket
expenses incurred in attending meetings of the Board of Directors.
Consulting Agreement with Mr. Enis. In February 1996, the Company
entered into a consulting agreement with Ben M. Enis pursuant to which Mr. Enis
advised and assisted the Company in formulating and implementing advertising and
marketing objectives and strategies, and was compensated for such services at a
rate of $7,500 per month. The consulting agreement expired in March 1997;
however, Mr. Enis continued to provide such consulting services and was
compensated therefor at a rate of $3,750 per month through February 1998, when
such services were terminated.
Compensation Committee Interlocks and Insider Participation
During 1997, the members of the Compensation Committee of the Board of
Directors were Ben M. Enis and Robert M. Chefitz. Currently, the members of the
Compensation Committee are John C. Nettles, Jr., Joseph J. Gardner, Howard A.
Christensen and Carl M. Koupal, Jr. None of such persons is an employee of the
Company, or serves or has formerly served as an officer of the Company. Mr.
Koupal is an executive officer of Western Resources.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of December 31, 1997 by each of the
Company's directors, each of the Company's executive officers and all directors
and executive officers of the Company as a group. Unless otherwise indicated
below, each individual named in the table has sole voting power and sole
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable.
Amount and Nature of Percent
Name of Beneficial Owner Beneficial Ownership (1) of Class (2)
- ------------------------ ------------------------ ------------
James M. Mackenzie, Jr. 431,381 *
John W. Hesse 348,255 *
John E. Mack, III 271,840 *
Steven A. Millstein 0 *
Thomas K. Rankin 274,589 *
George A. Weinstock 45,177 *
Peter C. Brown 0 *
Robert M. Chefitz (3) 2,545,444 3.1%
Howard A. Christensen 0 *
Ben M. Enis 30,000 *
Joseph J. Gardner 0 *
William J. Gremp 0 *
Steven L. Kitchen 300 *
Carl M. Koupal, Jr. 0 *
John C. Nettels, Jr. 0 *
Jane Dresner Sadaka 0 *
James Q. Wilson 20,100 *
All directors and executive officers
of Protection One as a group (17 persons) 3,979,086(4)4.8%
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* Less than one percent.
(1) Includes shares subject to options that are currently exercisable or
that become exercisable within 60 days after December 31, 1997 as
follows: Mr. Mackenzie, 143,000 shares; Mr. Hesse, 155,000 shares; Mr.
Mack, 161,000 shares; Mr. Rankin, 161,000 shares; Mr. Chefitz, 30,000
shares; Mr. Enis, 30,000 shares; Mr. Wilson, 20,000 shares; and all
directors and executive officers as a group, 712,000 shares.
(2) Based upon shares of Common Stock outstanding at December 31, 1997, as
adjusted for options that are currently exercisable or that become
exercisable within 60 days after such date.
(3) Mr. Chefitz, a director of the Company, is also general partner of APA
Excelsior III, L.P. and APA Excelsior III/Offshore, L.P. and an officer
of Patricof, the manager or investment adviser to such investment funds
and to CIN Venture Nominees, Ltd., also an investment fund. Mr. Chefitz
disclaims beneficial ownership of the shares listed in the table as
owned by him, 2,515,444 of which shares are owned by APA Excelsior III,
L.P., APA Excelsior III/Offshore, L.P. or CIN Venture Nominees, Ltd.,
and the remainder of which are subject to an option held by Patricof.
(4) Gives effect to the above footnotes.
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EXECUTIVE OFFICERS; EXECUTIVE
COMPENSATION AND RELATED INFORMATION
Executive Officers
The name, age and current position(s) with the Company of each
executive officer of the Company are as set forth below.
Name Age Position(s)
James M. Mackenzie, Jr. 50 President and Chief Executive Officer
and Director
John W. Hesse 48 Executive Vice President, Chief
Financial Officer and Secretary
John E. Mack, III 39 Executive Vice President-- Business
Development and Assistant Secretary
Steven A. Millstein 45 Executive Vice President-- New Market
Development
Thomas K. Rankin 40 Executive Vice President-- Branch
Management and Assistant Secretary
George A. Weinstock 60 Executive Vice President
For information with respect to the business experience of Mr.
Mackenzie, see "Election of Directors Nominees for Election" above.
John W. Hesse has been Executive Vice President, Chief Financial
Officer and Secretary of Protection One since September 1991.
John E. Mack, III was Vice President--Business Development of
Protection One from September 1991 until August 1996, and has been Protection
One's Executive Vice President--Business Development since August 1996 and
Assistant Secretary of Protection One since October 1994.
Steven A. Millstein has been Executive Vice President -- New Market
Development of Protection One since the Acquisition Date and has been President
of WestSec, Inc. since its formation in December 1996 and President of Westar
Security, Inc. since May 1995. Prior to that time he was Vice President,
Marketing and Sales for Acoustics Development Corporation, a manufacturer of
telephone booths and interactive media enclosures.
Thomas K. Rankin was Vice President--Branch Management of Protection
One from September 1991 to August 1996, and has been Protection One's Executive
Vice President--Branch Management since August 1996 and Assistant Secretary of
Protection One since October 1994.
George A. Weinstock has been Executive Vice President of Protection One
Alarm Monitoring, Inc. since November 1993 and Executive Vice President of
Protection One since June 1994, and was a director of Protection One from
November 1993 to May 1994. Prior to November 1993, Mr. Weinstock served as
President of American Home Security, Inc.
All officers of Protection One are appointed by Protection One's Board
of Directors and hold such officers' respective offices until their respective
successors have been appointed, or their earlier death, resignation or removal
by the Board of Directors.
Executive Compensation
Employment Agreements
Protection One currently has employment agreements with each of its
executive officers. Protection One's employment agreements with Messrs.
Mackenzie, Hesse, Mack, Rankin and Millstein were entered into on the
Acquisition Date pursuant to the Contribution Agreement. Such agreements
provide for minimum annual base salaries in the amounts of $379,000
(Mr. Mackenzie), $315,000 (Mr. Hesse) and $270,800 (Messrs. Mack, Rankin
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and Millstein). The term of each agreement is continually extended so as to
cause each such agreement to have a remaining term of three years. Each of these
employment agreements provides for participation by the executive officer in
Protection One's long-term incentive plan, bonus plan for senior executives and
other employee benefit plans. Each executive officer may terminate his
employment by Protection One for any reason at any time upon not less than 60
days' prior notice to Protection One. If an employment agreement is terminated
(i) by Protection One other than for Cause (as defined) or as a result of the
executive officer's death or disability or (ii) by the executive officer for
Good Reason (as defined), the executive officer will be entitled to receive
severance payments (the "Termination Amount") equal in the aggregate to three
times the executive officer's then annual base salary plus the last annual bonus
paid or payable to such officer, and all options and other awards previously
granted to such officer will become exercisable and will remain exercisable for
three years. "Cause" is defined in the employment agreements to mean: (i) an act
of fraud, embezzlement or similar conduct by the executive officer involving
Protection One, (ii) conviction of a felony involving moral turpitude, (iii) a
continuing, repeated willful failure or refusal by the executive officer to
perform his duties, (iv) willful or serious misconduct on the part of the
executive officer that continues and is demonstrably injurious to Protection
One, or (v) an activity by the executive officer that is in conflict with or
adverse to the business interests of Protection One. "Good Reason" is defined by
the employment agreements to mean an uncured breach of Protection One's
obligations under the employment agreement or a material diminution in the
executive officer's current position, responsibilities or authority. Each
executive officer has agreed in his employment agreement not to compete with
Protection One and not to solicit any Protection One employee, or hire any
Protection One employee whose annual base salary and fixed or guaranteed bonus
would be more than $50,000, prior to the later of the first anniversary of the
date on which the officer's employment by Protection One terminates and the date
on which the Termination Amount is paid in full.
Protection One's employment agreement with Mr. Weinstock has an initial
term that expires in November 1998; thereafter, the agreement will be
automatically extended for successive one-year periods unless prior notice of
cancellation is given. The agreement provides for annual compensation to Mr.
Weinstock in the amount of $150,000 per year, subject to cost of living
adjustments, and an annual bonus in the amount of $50,000 in the first year and
thereafter as determined by Protection One's Board of Directors. Protection One
may terminate Mr. Weinstock's employment for cause, including: (i) his
disability for a period in excess of one year; (ii) his conviction of a felony
involving moral turpitude; or (iii) material breach of or default under his
related non-competition agreement. If Mr. Weinstock's employment agreement is
terminated (a) by Protection One without cause, (b) due to a material breach of
the employment agreement by Protection One, or (c) as a result of a change of
control of Protection One, then Protection One will be required to pay Mr.
Weinstock an amount equal to 50% of all compensation and benefits that would
have been due to Mr. Weinstock under his employment agreement for the remainder
of the unexpired term, discounted to its present value. Mr. Weinstock has also
agreed not to compete with Protection One until November 1998 and is compensated
for his covenant not to compete in the amount of $2,500 per month for a period
of 60 months.
Summary of Executive Compensation
The following table summarizes the compensation for the fiscal years
ended December 31, 1997 and September 30, 1997, 1996 and 1995 of Protection
One's Chief Executive Officer and the four other most highly-paid executive
officers of Protection One.
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<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
Restricted Securities
Stock Underlying All Other
Annual Compensation Awards Options Compensation
Name and Principal Position(s) Year (1) Salary($) Bonus($) ($) (2) Granted (#) ($) (3)
- ------------------------------ -------- --------- -------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
James M. Mackenzie, Jr. 1997* 315,976 1,616,232(4) -- -- --
President and 1997 300,155 -- -- 25,000 1,727
Chief Executive Officer 1996 298,104 60,000 40,000(5) 100,000 1,818
1995 267,347 80,000 20,000(6) -- --
John W. Hesse 1997* 277,368 1,646,233(4) -- -- --
Executive Vice President, 1997 264,155 -- -- 25,000 1,524
Chief Financial Officer 1996 250,728 60,000 40,000(5) 100,000 1,706
and Secretary 1995 226,600 80,000 20,000(6) -- --
John E. Mack, III 1997* 214,452 1,590,758 -- -- --
Executive Vice President-- 1997 199,172 -- -- 25,000 1,159
Business Development and 1996 186,128 60,000 40,000(5) 100,000 263
Assistant Secretary 1995 162,000 80,000 20,000(6) -- --
Thomas K. Rankin 1997* 214,453 1,590,758(4) -- -- --
Executive Vice President-- 1997 199,172 -- -- 25,000 --
Branch Management and 1996 186,128 60,000 40,000(5) 100,000 2,288
Assistant Secretary 1995 162,000 80,000 20,000(6) -- --
George A. Weinstock 1997* 163,000 25,000 -- -- --
Executive Vice President 1997 157,000 25,000 -- -- 1,699
1996 163,500 25,000 -- -- 2,096
1995 157,500 25,000 -- -- --
(1) Information given for "1997*" relates to the fiscal year ended December
31, 1997. All other amounts relate to the fiscal years ended September
30, 1997, 1996 and 1995. Information relating to January 1 through
September 30, 1997, is included in the information presented for the
year ended September 30, 1997 and for the year ended December 31, 1997.
Overlapping fiscal years are presented because the Company changed its
fiscal year end from September 30 to December 31 effective as of the
Acquisition Date.
(2) Restricted stock is fully vested when awarded. The executive officer
owning such shares will receive the same dividends on these shares as
are received by all other holders of the Common Stock.
(3) Amounts stated reflect contributions made by Protection One to such
executive officer's account under Protection One's 401(k) plan.
(4) A portion of this performance bonus will be paid in fiscal 1998.
(5) Awarded in fiscal 1996 and paid in fiscal 1997 in the form of 4,156
shares of Common Stock. As no consideration was paid for these shares,
the value set forth in the chart is calculated by multiplying the
closing price of the Common Stock as reported on the Nasdaq National
Market on the date of award ($9.625) by the number of shares awarded.
(6) Awarded in fiscal 1995 and paid in fiscal 1996 in the form of 2,500
shares of Common Stock. As no consideration was paid for these shares,
the value set forth in the chart is calculated by multiplying the
closing price of the Common Stock as reported on the Nasdaq National
Market on the date of award ($8.00) by the number of shares awarded.
</TABLE>
Other compensation in the form of perquisites and other personal
benefits has been omitted from the above table as the aggregate amount of such
perquisites and other personal benefits constituted the lesser of $50,000 or 10%
of the total annual salary and bonus of the named executive officer for such
year.
Steven A. Millstein became an Executive Vice President of the Company
on the Acquisition Date. As described above, under the terms of the employment
agreement entered into between Mr. Millstein and the Company as of that date,
Mr. Millstein's base salary is $270,800. Prior to the Acquisition Date, Mr.
Millstein served, and he continues to serve, as the President of WestSec, Inc.,
and Westar Security, Inc., which became subsidiaries of the Company on the
Acquisition Date. During the year ended December 31, 1997, Mr. Millstein's
aggregate compensation from the Company, WestSec, Inc. and Westar Security, Inc.
consisted of salary in the amount of $216,777 and other compensation in the
amount of $215,728 (consisting of $105,728 representing compensation for
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<PAGE>
his relocation to Dallas, Texas, and $110,000 representing a retention bonus
earned in fiscal 1997 and to be paid in fiscal 1998).
Performance Warrants
On September 16, 1991, Protection One granted to each of the following
executive officers a Common Stock Performance Warrant (collectively, the
"Performance Warrants") to purchase the following number of shares of Common
Stock, in each case at a price of $.167 per share: Mr. Mackenzie (180,621), Mr.
Hesse (131,703), Mr. Mack (94,074) and Mr. Rankin (94,074). The Performance
Warrants originally were to become exercisable over a five-year period upon
Protection One's attainment of certain return on investment objectives. On June
29, 1994, the Board of Directors of Protection One modified the performance and
vesting criteria to provide that the Performance Warrants would be immediately
exercisable in full. However, each of Messrs. Mackenzie, Hesse, Mack and Rankin
agreed in connection with such modifications that such officer would not
exercise his Performance Warrant (i) prior to September 16, 1995, for more than
40% of the shares subject to such warrant, and (ii) prior to September 16, 1996,
for more than 70% of such shares, subject to earlier termination of such
restrictions on exercise in the event Protection One engaged in a merger, sale
of assets or other business combination in which the other party to the
transaction was the survivor or purchaser and consideration was distributed to
holders of the Common Stock. In the event the holder of a Performance Warrant
ceased to be an employee of Protection One, the Performance Warrant became
exercisable in whole or in part by the holder or his estate during the 90 days
following Protection One's receipt of notice of the termination, and to the
extent not exercised would terminate on such 90th day. The Performance Warrants
were to expire on September 16, 2002.
During the year ended December 31, 1997, Messrs. Mackenzie, Hesse and
Rankin exercised all of their Performance Warrants in full. Mr. Mack exercised
all of his Performance Warrants in 1996. The following table sets forth certain
information concerning the exercises of such warrants during 1997:
Aggregate Performance Warrant Exercises in Last Fiscal Year
Shares Value
Acquired on Realized (A)
Name Exercise (#) ($)
James M. Mackenzie, Jr........................... 180,621 2,013,166
John W. Hesse.................................... 130,412(B) 1,453,546
Thomas K. Rankin................................. 94,074 1,048,530
(A) Value is calculated by subtracting the exercise price from the fair
market value of the Common Stock at December 31, 1997 and multiplying
the result by the number of shares acquired. Fair market value is
calculated based upon the average of the high and low sales prices of
the Common Stock as reported on the Nasdaq National Market on December
31, 1997 ($11.31).
(B) An additional 1,291 shares of Common Stock otherwise issuable by
Protection One on exercise of this warrant were retained by Protection
One in payment of the exercise price.
Stock Option Grants
The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended December 31, 1997 to the
executive officers named in the Summary Compensation Table.
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<PAGE>
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Potential Realizable
Individual Grants (1) Value At Assumed
Number of Percent of Annual Rates of
Securities Total Options Exercise Stock Price
Underlying Granted to or Base Appreciation For
Options Employees Price Expiration Option Term(3)
Name Granted in Fiscal Year ($/Sh) (2) Date 5%($) 10%($)
---- ------- -------------- ---------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
James M. Mackenzie, Jr..... 12,500 3.3% 9.50 3/20/07 74,681 189,257
12,500 3.3% 15.00 3/20/07 5,931 120,507
John W. Hesse.............. 12,500 3.3% 9.50 3/20/07 74,681 189,257
12,500 3.3% 15.00 3/20/07 5,931 120,507
John E. Mack, III.......... 12,500 3.3% 9.50 3/20/07 74,681 189,257
12,500 3.3% 15.00 3/20/07 5,931 120,507
Thomas K. Rankin........... 12,500 3.3% 9.50 3/20/07 74,681 189,257
12,500 3.3% 15.00 3/20/07 5,931 120,507
(1) All options were granted on March 20, 1997. All such options have 10-year terms and are currently exercisable in full.
(2) The exercise price was determined by reference to the closing price of the Common Stock reported on the Nasdaq
National Market on the date of grant ($9.50).
(3) The amounts shown for potential realizable values are based upon the
arbitrary assumption that the Common Stock appreciates at the annual
rates shown (compounded annually) from the date of grant until the
expiration of the option term. These numbers are calculated based upon
the requirements promulgated by the Securities and Exchange Commission,
and do not represent an estimate by Protection One of future stock
price growth.
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth, for each of the executive officers
named in the Summary Compensation Table above, certain information regarding the
value of stock options held at fiscal year end. No stock option was exercised by
any such executive officer during the fiscal year ended December 31, 1997.
-12-
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises and Fiscal Year-End Option Values
Number of Shares
of Stock Underlying Value of Unexercised
Unexercised In-the-Money Options
Options at 12/31/97 at 12/31/97 ($)(1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C>
James M. Mackenzie, Jr................. 143,000/-- 341,156/--
John W. Hesse.......................... 155,000/-- 398,906/--
John E. Mack, III...................... 161,000/-- 427,781/--
Thomas K. Rankin....................... 161,000/-- 427,781/--
George A. Weinstock.................... 12,000/-- 57,750/--
(1) Value is calculated by subtracting the exercise price from the assumed
fair market value of the securities underlying the option at fiscal
year end and multiplying the result by the number of shares for which
the option is in the money. Fair market value was calculated based upon
the average of the high and low sales prices of the Common Stock as
reported on the Nasdaq National Market on December 31, 1997 ($11.31).
There is no guarantee that if and when any such option is exercised,
the option will have this value.
</TABLE>
COMPENSATION COMMITTEE REPORT ON
PROTECTION ONE EXECUTIVE COMPENSATION
The following report was issued by the Compensation Committee of the
Board of Directors with respect to the fiscal year ended December 31, 1997.
The compensation of the Company's executive officers is determined by
the Compensation Committee of the Board of Directors based on the goals and
policies established by the Board of Directors.
The compensation of Protection One's Chief Executive Officer, like the
other executive officers, consists of a combination of salary and bonuses. In
addition to those factors applying generally to all executives as indicated
below, Mr. Mackenzie's compensation for fiscal 1997 reflects the Company's
successful combination with the Western Resources Security Business pursuant to
the Contribution Agreement, as well as the Company's performance in the areas of
revenues and EBITDA.1
Protection One has entered into employment agreements with each of the
executive officers. The base salary for each of the executive officers is set
forth in his employment agreement, subject to cost of living and other
adjustments pursuant to the policies established by the Compensation Committee.
Salaries for executive officers are supplemented by bonuses paid in cash and in
common stock, as well as warrants and options.
Since the inception of Protection One in September 1991, the
Compensation Committee has used common stock, warrants and options as a means of
providing performance-based compensation to all executive officers. Unregistered
common stock comprised 20% and 40% of bonuses paid to executive officers in
fiscal 1995 and 1996, respectively. Of the stock options issued to executive
officers in fiscal 1996, 30% are exercisable at a price equal to a 87.5% premium
to the common stock price at the grant date. Similarly, in fiscal 1997, 50% of
executive officer stock options were granted with an exercise price equal to a
57.9% premium to the common stock price on the grant date. The Compensation
Committee believes linking executive compensation to the performance of
Protection One's common stock aligns the interests of the executive officers
with those of shareholders.
- --------
1 EBITDA is earnings before interest, taxes, depreciation and amortization.
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<PAGE>
In determining the compensation of Protection One's executive officers,
the Compensation Committee considers a combination of objective and subjective
performance criteria, all of which the Compensation Committee believes
contribute to shareholder value. Objective criteria include:
- - Revenue and EBITDA1 growth - Margin expansion
- - Subscriber growth - Subscriber and MRR attrition
The Compensation Committee, in conjunction with the Board of Directors,
reviews the business plans and projections prepared by management and compares
Protection One's actual performance to the objective criteria set forth in such
plans and projections.
Subjective criteria considered by the Compensation Committee in
determining executive officer compensation include the consummation of
acquisitions, growth in Protection One's dealer program, strategic alliance,
joint venture and affinity program activities, management and Protection One's
infrastructure enhancements and success in capital formation. Bonuses paid for
fiscal year 1997 performance reflect Protection One's successful formation of
relationships with PacifiCorp, Salt River Project (a Phoenix-based utility) and
SBC Communications. In addition, such bonuses recognize the important role the
executive officers have played in the transaction with the security businesses
of Western Resources, including their agreement to serve in similar capacities
for the combined businesses post-merger. The Compensation Committee also
considers compensation paid to other persons with comparable skills and
experience in the security industry and other service industries, Protection
One's performance in comparison to its competitors and performance in each
officer's specific area of responsibility.
Robert M. Chefitz
Ben M. Enis
- --------
1 EBITDA is earnings before interest, taxes, depreciation and amortization.
-14-
<PAGE>
PERFORMANCE GRAPH
The following chart compares the cumulative total stockholder returns
on the Common Stock since September 29, 1994 (the date on which the Common Stock
was first traded on the Nasdaq Stock Market) to the cumulative total returns
over the same period of the Russell 2000 index and a peer group index comprised
of the common stock of Alarmguard Holdings, Inc., Borg Warner Security
Corporation, The Pittston Brinks Group Common Stock of The Pittston Company and
Response USA, Inc. (the "Peer Group"). The Peer Group is based on the selection
of companies operating in the security alarm monitoring business. The annual
returns for the Peer Group index are weighted based on the capitalization of
each company within the Peer Group at the beginning of each period for which a
return is indicated. The chart assumes the value of the investment in the Common
Stock and each index was $100 at September 29, 1994 and that all dividends were
reinvested.
Comparison of Cumulative Total Stockholder Return
GRAPH SHOWING THE FOLLOWING:
Cumulative Total Return
9/29/94 12/31/94 12/31/95 12/31/96 12/31/97
Protection One, Inc. 100 74.64 156.94 151.20 236.60
Peer Group 100 88.37 104.31 94.56 143.16
Russell 2000 100 98.14 126.05 146.98 179.81
The materials contained in the foregoing Compensation Committee Report
on Executive Compensation and included under the caption "Performance Graph" are
not "soliciting material," are not deemed filed with the Securities and Exchange
Commission and are not to be incorporated by reference in any filing of the
Company under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), whether made before or after the
date of this Proxy Statement and irrespective of any general incorporation
provision contained therein.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Exchange Act and the rules issued
thereunder, Protection One's executive officers and directors are required to
file with the Securities and Exchange Commission reports of ownership and
changes in ownership of shares of Common Stock. Copies of such reports are
required to be furnished to Protection One. Based
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<PAGE>
solely on Protection One's review of the copies of such reports furnished to
Protection One or on written representations to Protection One that no such
reports were required, Protection One believes that during the fiscal year ended
December 31, 1997, all of Protection One's executive officers and directors and
all beneficial owners of more than 10% of the Common Stock filed on a timely
basis all reports, if any, required by Section 16(a) of the Exchange Act, except
that one Form 4 disclosing the exercise of such officer's Performance Warrant
was filed three business days after the due date by each of Messrs. Mackenzie,
Hesse and Rankin.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Western Resources
As described above, pursuant to the Contribution Agreement, on November
24, 1997, Western Resources acquired control of the Company in consideration for
the transfer by Western Resources of cash and securities to the Company (the
"Western Transaction"). In connection with the Western Transaction, Western
Resources was granted the Western Option to purchase additional shares of Common
Stock. See "Change in Control of the Company."
Pursuant to the Contribution Agreement, Western Resources has agreed to
certain arrangements relating to the election of directors of Protection One.
See "Election of Directors - Nominees for Election." In addition, during the
10-year period following the Acquisition Date, a merger or a sale of all or
substantially all of the assets of Protection One involving Western Resources or
any affiliate of Western Resources generally will require the prior approval of
a majority of the "Independent Directors" (as defined in the Contribution
Agreement), and Western Resources may not acquire more than 85% of the
outstanding shares of Common Stock or other voting securities of Protection One
except under specified circumstances and subject to specified limitations.
Effective January 1, 1998, Protection One Alarm Monitoring, Inc., a
wholly-owned subsidiary of the Company ("Monitoring"), acquired Network
Multi-Family Security Corporation, the leading provider of security alarm
monitoring to multi-family dwellings, from Westar Capital, Inc., a wholly-owned
subsidiary of Western Resources, in exchange for a promissory note of Monitoring
in the principal amount of approximately $180 million. On March 2, 1998,
Monitoring executed a promissory note in favor of Westar Capital, Inc. in the
principal amount of $274 million. Both of these notes bear interest at the rate
of 611/16% per annum and are due and payable June 1, 1998. Prior to the maturity
of these notes, Monitoring anticipates entering into a longer term financing
arrangement with Westar Capital, Inc.
Transaction with Executive Officer
During 1997, the Company made a personal loan to John W. Hesse, the
Executive Vice President, Chief Financial Officer and Secretary of the Company.
The largest aggregate amount of indebtedness outstanding during the year was
$100,000. The balance of this loan, together with interest in the amount of
$4,109.59, was repaid in full on November 24, 1997.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors has selected Arthur
Andersen LLP ("Andersen") as the independent public accountants to audit the
consolidated financial statements of the Company and its subsidiaries for fiscal
1998. A representative of that firm is expected to be present at the Meeting,
will have an opportunity to make a statement if so desired, and will be
available to respond to appropriate questions. If such firm should decline to
act or otherwise become incapable of acting, or if such firm's employment is
discontinued, the Audit Committee will select other independent public
accountants for the Company.
The Company retained Andersen to serve as principal accountant for the
Company and its subsidiaries beginning with the calendar year ended December 31,
1997, and dismissed the firm of Coopers & Lybrand LLP ("C&L"). The dismissal of
C&L as principal accountant and the appointment of Andersen as principal
accountant was unanimously approved by all the members of the Company's Board of
Directors on January 16, 1998, as recommended by the Audit Committee.
-16-
<PAGE>
The decision to dismiss C&L and engage Andersen followed the Western
Transaction and the Company's decision to change its fiscal year to a calendar
year as required by the Western Transaction. See "Change in Control of the
Company." Andersen is the principal accountant for Western Resources.
The audit reports of C&L on the Company's consolidated financial
statements as of and for the fiscal years ended September 30, 1997 and 1996 did
not contain an adverse opinion or a disclaimer of opinion nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
During fiscal years 1997 and 1996, there were no disagreements with C&L on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which, if not resolved to C&L's satisfaction, would
have caused it to make reference to the subject matter of the disagreement in
connection with its reports. In addition, there were no reportable events as
described under Item 304(a)(1)(v)(A) through (D) of Regulation S-K promulgated
by the Securities and Exchange Commission during fiscal years 1997 and 1996.
Representatives of C&L are not expected to be present at the Meeting.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 annual
meeting of the Company's stockholders must be received at the Company's
principal executive offices at 6011 Bristol Parkway, Culver City, California
90230, addressed to the attention of the Secretary of the Company, by December
8, 1998 in order to be considered for inclusion in the proxy statement and form
of proxy relating to such meeting.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented at
the Meeting other than the matter described above. If any other matter properly
comes before the Meeting, the persons named in the enclosed form of proxy intend
to vote said proxy in accordance with their best judgment on such matter.
ANNUAL REPORT ON FORM 10-K
An additional copy of the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, including the consolidated financial statements
and financial statement schedules of the Company but excluding exhibits to such
report, will be provided to each person to whom a copy of this Proxy Statement
has been sent by the Company and to each other beneficial owner of shares of
Common Stock as of the Record Date, without charge, upon written request of such
person. Any such request should be directed to Montgomery W. Cornell, Treasurer
and Director of Investor Relations, 4221 W. John Carpenter Freeway, Irving,
Texas 75063, and each such beneficial owner must include in such request a good
faith representation that as of the Record Date the person making the request
beneficially owned one or more shares of Common Stock. A list of the exhibits to
such annual report is included in the report; a copy of any such exhibit will be
furnished upon request and payment of a minimal fee equal to the Company's
reasonable expenses in furnishing such copy.
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<PAGE>
PROXY
PROTECTION ONE, INC.
1998 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Protection One, Inc., a Delaware
corporation (the "Company"), hereby appoints JOHN W. HESSE and STEVEN A.
MILLSTEIN and each of them, with full power of substitution to each, proxies of
the undersigned to represent the undersigned and to vote all shares of Common
Stock, par value $.01 per share, of the Company that the undersigned would be
entitled to vote at the 1998 Annual Meeting of Stockholders of the Company to be
held on April 23, 1998 (the "Meeting") and at all adjournments thereof, as
directed below and in their discretion on such other matters as may properly
come before the Meeting, as if the undersigned were present and voting at the
Meeting.
The shares represented by this proxy, when duly executed and returned,
will be voted as directed. WHERE NO DIRECTION IS GIVEN, SUCH SHARES WILL BE
VOTED FOR THE ELECTION OF DIRECTORS (ITEM 1). In the event a named nominee for
director is unavailable for election, the shares represented by this proxy may
be voted for a substitute nominee selected by the Board of Directors.
The proxies named herein are authorized to vote in their discretion
upon such other matter or matters as may properly come before the Meeting. The
undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement each dated April 2, 1998 and the Annual Report
on Form 10-K for the year ended December 31, 1997.
ELECTION OF DIRECTORS Withheld
Nominees: For For All
------ -------
James M. Mackenzie, Jr. William J. Gremp
Peter C. Brown Steven L. Kitchen
Robert M. Chefitz Carl M. Koupal, Jr.
Howard A. Christensen John C. Nettles, Jr.
Ben M. Enis Jane Dresner Sadaka
Joseph J. Gardner James Q. Wilson
WITHHOLD AUTHORITY to vote for the following nominee(s) only. (Write the name at
the nominee(s) below).
Signature(s)_____________________________________________ Date__________________
(Please sign exactly as your name or names appear(s) on the label ______
hereon. When signing in fiduciary or representative capacity or as
a corporate officer, please so indicate and state such capacity.)
<PAGE>
