<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
<TABLE>
<S> <C>
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
/X/ Definitive additional materials
/ / Soliciting material under Rule 14a-12
</TABLE>
PROTECTION ONE, INC.
- - - -------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - - -------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
<TABLE>
<S> <C> <C>
/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 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / 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:
----------------------------------------------------------
</TABLE>
<PAGE>
PROTECTION ONE, INC.
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
To the Stockholders of Protection One, Inc.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Meeting") of Protection One, Inc., a Delaware corporation (the "Company"), will
be held at 10:00 A.M., Pacific Daylight Time, on Tuesday, May 23, 2000 at The
Ritz Carlton Marina del Rey at 4375 Admiralty Way, Marina del Rey, California
90292, for the following purposes, all as set forth in the attached
Proxy Statement:
(1) To elect eleven directors;
(2) To approve an amendment and restatement of the Company's Employee Stock
Purchase Plan; and
(3) To transact such other business as may properly come before
the Meeting.
The Board of Directors has fixed the close of business on April 11, 2000 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
/s/ Annette M. Beck
Annette M. Beck
PRESIDENT
April 21, 2000
<PAGE>
PROTECTION ONE, INC.
6011 BRISTOL PARKWAY
CULVER CITY, CALIFORNIA 90230
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 23, 2000
------------------------
The date of this Proxy Statement is April 21, 2000.
------------------------
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 2000 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 10:00 A.M., Pacific Daylight Time, on Tuesday, May 23, 2000, at The Ritz
Carlton Marina del Rey at 4375 Admiralty Way, California 90292.
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 21, 2000. 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, 1999, a copy of which was mailed to stockholders of the
Company on or about April 14, 2000.
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.
INTRODUCTION
MATTERS TO BE CONSIDERED
At the Meeting, the stockholders of the Company will vote upon (i) the
election of eleven directors to serve for one year and until their successors
have been elected and shall have qualified; (ii) the approval of an amendment
and restatement of the Company's Employee Stock Purchase Plan; and (iii) such
other business as may properly come before the Meeting. The Board of Directors
does not know of any other matters to be presented at the Meeting.
VOTING RIGHTS AND VOTES REQUIRED
The Board of Directors has fixed the close of business on April 11, 2000 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, 126,945,337 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 represented but 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.
<PAGE>
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 eleven 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 eleven directors
will be elected by a plurality vote (i.e., the eleven 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.
Approval of the amendment and restatement of the Employee Stock Purchase
Plan 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. 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 or such other number of
votes as may be required by applicable law. Abstentions will be counted in
determining the total number of shares present and entitled to vote on such
approval or any such proposal. Accordingly, although not counted as a vote "for"
or "against" such approval or proposal, an abstention on such approval or any
such proposal will have the same effect as a vote "against" such approval or
proposal. Broker non-votes will not be counted in determining the number of
shares present and entitled to vote on such approval or 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 Annette M. Beck,
Douglas T. Lake and Anthony D. Somma 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, TO APPROVE THE AMENDMENT AND
RESTATEMENT OF THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN 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 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.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of Westar Capital, Inc. ("Westar Capital") of the Common
Stock as of April 11, 2000. No other person is known to the Company to
beneficially own more than 5% of the outstanding Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- - - ------------------------------------ -------------------- --------
<S> <C> <C>
Westar Capital, Inc.
818 S. Kansas Avenue
Topeka, KS 66612 107,328,902(1) 84.55%
</TABLE>
- - - ------------------------
(1) Westar Capital is a wholly-owned subsidiary of Western Resources, Inc.
("Western Resources"). Western Resources has shared voting power and shared
investment power with respect to, and is deemed under Rule 13d-3 of the
Securities Exchange Act of 1934, as amended, to beneficially own, these
shares.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
Eleven 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 between the Company and Western Resources, dated
July 30, 1997, as amended (the "Contribution Agreement"), provides that 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. The nominees listed below
satisfy the foregoing requirements. As indicated under "Security Ownership of
Certain Beneficial Owners" above, Westar Capital, a wholly-owned subsidiary of
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 Westar
Capital 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 BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE
NOMINEES LISTED BELOW AS A DIRECTOR OF THE COMPANY.
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.
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.
ANNETTE M. BECK, age 37, has been a director of Protection One since January
2000 and has been the President and Chief Operating Officer of Protection One
since July 1999. From October 1998 and January 1999, respectively, until January
2000, Ms. Beck served as President and Chairman of the Board of Directors of
Kansas Gas and Electric Company, a wholly-owned subsidiary of Western Resources.
She was the Director--Strategic Planning from 1995 through 1998 and
Director--Customer Service Operations
3
<PAGE>
from August 1997 through September 1998 for Western Resources, Inc. She also
served as Vice President--Customer Service and Electric Operations from October
1998 through July 1999 for Western Resources, Inc.
HOWARD A. CHRISTENSEN, age 66, has been a director of Protection One since
November 1997. Since 1982, he has been the President and Chief Executive Officer
of Christensen & Associates, an investor relations and strategic planning firm.
JOHN B. DICUS, age 39, has been a director of Protection One since January
2000. Since 1996, Mr. Dicus has been President, Chief Operating Officer and
Director of Capitol Federal Savings. From 1992 to 1996, he served as Executive
Vice President of Capitol Federal Savings. He has also been the President, Chief
Operating Officer and Director of Capitol Federal Financial since March 1999.
MARIA DE LOURDES DUKE, age 53, has been a director of Protection One since
May 1999. Ms. Duke is President of Fundacion Amistad, a non-profit organization
working to increase awareness of Cuban history, cultures and society, and Senior
Vice President of The Harbor for Boys and Girls, an agency which offers
education, recreation and guidance programs to children in the Harlem area of
New York City. She has also been a member of the Women's Commission of the
International Rescue Committee since 1998, a member of the Duke University's
Provost Advisory Committee on International Affairs since 1996 and is a member
of the NYU Medical Center Child Study Center.
BEN M. ENIS, age 58, has been a director of Protection One since September
1994. Until 1999, Mr. Enis was a Professor of Marketing at the University of
Southern California where he currently serves as Professor Emeritus of
Marketing. He is currently a director of Countrywide Credit Industries, Inc.
DONALD A. JOHNSTON, age 66, has been a director of Protection One since
January 2000. Since July 1996, Mr. Johnston has been a Consultant with
Investment Management Group, Commerce Bank, N.A. He also served as Chairman
Emeritus of Maupintour, Inc, a travel agency, from June 1995 through January
1996. He is currently a director of Commerce Bank, N.A., Douglas County
Development, Inc. and Wakarusa Valley Development, Inc.
CARL M. KOUPAL, JR., age 46, has been a director of Protection One since
November 1997. Mr. Koupal is Executive Vice President and Chief Administrative
Officer for Western Resources. From January 1995 to July 1995, he was Executive
Vice President of Corporate Communications, Marketing and Economic Development
for Western Resources.
DOUGLAS T. LAKE, age 49, has been a director of Protection One since March
1999 and is Chairman of the Board of Directors of Protection One. Since
September 1998, Mr. Lake has been Executive Vice President and Chief Strategic
Officer of Western Resources. He also served as a Senior Managing Director at
Bear Stearns & Co., Inc. from 1995 to 1998. He is currently a director of
Guardian International, Inc., Paradigm Direct, LLC and ONEOK, Inc.
JOHN H. ROBINSON, JR., age 49, has been a director of Protection One since
January 2000. Mr. Robinson is an Executive Director of Amey PLC, a support
services company based in the United Kingdom. Until March 2000, he was Vice
Chairman and Partner of Black & Veatch, an engineering construction company,
Chairman of Black & Veatch UK LTD, and Managing Partner of Black & Veatch LLP.
He is currently a director of Commerce Bancshares, Inc., Alliance Resource
Partners LP and Coeur Precious Metals.
ANTHONY D. SOMMA, age 36, has been a director of Protection One since May
1999. Since March 1999, Mr. Somma has been the Secretary and Treasurer of the
Company. From March 1999 through July 1999 he served as Acting Chief Financial
Officer and on such date he was promoted to and continues to serve as Chief
Financial Officer. He served as Manager of Corporate Development at Astra
Resources, a subsidiary of Western Resources from December 1994 through July
1995. In July 1995, he moved to Western Resources' corporate office in the
Corporate Strategy Department as a Project Manager. He was
4
<PAGE>
promoted in July 1996 to Director of Corporate Strategy, and in October 1998 to
Executive Director of Finance of Western Resources, in which position he served
until joining the Company.
JAMES Q. WILSON, age 68, has been a director of Protection One since June
1996. Mr. Wilson is retired as a Professor of Management and Public Policy at
the University of California at Los Angeles. He 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, a Community and Charity
Committee, an Audit and Finance Committee and a Nominating Committee. Prior to
May 12, 1999, the Audit Committee and Finance Committee were separate. The
members of the Compensation Committee are Mr. Christensen, Ms. Duke, Mr. Koupal
and Mr. Wilson. The Compensation Committee establishes the salaries and bonuses
for executive officers of the Company and reviews and makes recommendations to
the Board of Directors regarding the Company's compensation and other benefit
plans. The members of the Community and Charity Committee are Mr. Robinson,
Mr. Dicus and Mr. Enis. The Community and Charity Committee reviews and
recommends action relating to community and charitable activities of the
Company. The members of the Audit and Finance Committee are Mr. Enis, Mr. Dicus
and Mr. Johnston. The Audit and Finance 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 as well as reviews the financial structure and
activities of the Company. The members of the Nominating Committee are Ms. Duke,
Mr. Koupal, Mr. Lake and Mr. Wilson. The Nominating Committee reviews
nominations for and recommends nominees to the Board of Directors of the
Company. The Nomination Committee will not consider nominees recommended by
security holders.
During the year ended December 31, 1999, the Board of Directors held
thirteen meetings. The Compensation Committee held five meetings. The Community
and Charity Committee held three meetings. The Audit and Finance Committee held
four meetings after May 12, 1999. Prior to their combination on such date, the
Audit Committee held three meetings and the Finance Committee held one meeting.
The Nominating Committee held two meetings.
DIRECTOR COMPENSATION. All directors of Protection One who are not
employees of Protection One or Western Resources will receive for their services
as directors an annual fee of $20,000 and an additional fee of $1,000 per
meeting (or $600 per telephonic attendance) of the Board and $750 per meeting
(or $600 per telephonic attendance) of committees thereof attended.
On January 21, 1999, pursuant to the Company's long-term incentive plan,
each non-employee director received an option to acquire 5,000 shares of Common
Stock. Each such option has a term of 10 years, will vest by one-third on each
anniversary of the grant date for three years and has an exercise price based on
the closing price of the Common Stock as reported on the New York Stock Exchange
on the date granted.
All directors are reimbursed for travel and other out-of-pocket expenses
incurred in attending meetings of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, the members of the Compensation Committee were Mr. Christensen,
Ms. Duke, Mr. Koupal and Mr. Wilson. None of such persons is an employee of the
Company, or serves or has formerly served as an officer of the Company.
5
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock, and of the common stock of Western
Resources, as of April 11, 2000 by each of the Company's directors, director
nominees and named executive officers, and all directors, director nominees 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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT OF BENEFICIAL OWNERSHIP OF PERCENT OF
NAME OF BENEFICIAL OWNER OF THE COMPANY(2) CLASS(3) WESTERN RESOURCES(5) CLASS(6)
- - - ------------------------ -------------------- ---------- ----------------------- ----------
<S> <C> <C> <C> <C>
Annette M. Beck.................... 0 * 9,200 *
Howard A. Christensen.............. 3,333 * 0 *
John B. Dicus...................... 0 * 1,500(7) *
Maria de Lourdes Duke.............. 1,111 * 0 *
Dr. Ben M. Enis.................... 33,334 * 0 *
Donald A. Johnston................. 0 * 369(8) *
Carl M. Koupal, Jr................. 0 * 135,068 *
Douglas T. Lake.................... 0 * 179,382 *
John E. Mack, III(1)............... 427,635 * 99 *
James M. Mackenzie, Jr.(1)......... 683,981 * 0 *
Steven A. Millstein(1)............. 125,000 * 0 *
Thomas K. Rankin(1)................ 429,551 * 0 *
John H. Robinson, Jr............... 0 * 0 *
Anthony D. Somma................... 0 * 7,433 *
James Q. Wilson.................... 25,434 * 0 *
All directors, director nominees
and executive officers of
Protection One as a group
(15 persons)..................... 1,729,379(4) 1.36% 333,051(9) *
</TABLE>
- - - ------------------------
* Less than one percent.
(1) Messrs. Mack, Mackenzie, Millstein and Rankin are no longer employed by
Protection One.
(2) Includes shares subject to options that are currently exercisable or that
become exercisable within 60 days after April 11, 2000 as follows:
Mr. Christensen, 3,333; Ms. Duke, 1,111; Mr. Enis, 33,334; Mr. Mack,
316,600; Mr. Mackenzie, 395,600; Mr. Millstein, 125,000; Mr. Rankin,
311,600; and Mr. Wilson, 23,334.
(3) Based upon shares of Common Stock outstanding at April 11, 2000, as adjusted
for options of such person(s) that are currently exercisable or that become
exercisable within 60 days after April 11, 2000.
(4) Gives effect to footnotes 2 and 3.
(5) Includes shares subject to options that are currently exercisable or that
become exercisable within 60 days after April 11, 2000 as follows: Ms. Beck,
8,208; Mr. Koupal, 53,499; Mr. Lake, 23,333; and Mr. Somma, 7,175.
(6) Based upon shares of common stock of Western Resources outstanding at
April 11, 2000, as adjusted for options of such person(s) that are currently
exercisable or that become exercisable within 60 days after April 11, 2000.
(7) Includes 1,500 shares jointly owned with Mr. Dicus's wife. Such shares are
subject to shared voting power and shared investment power.
(8) Includes 169 shares held in the Alice Ann Dewell Johnston Revocable Trust of
which Mr. Johnston's wife is the trustee. Such shares are subject to shared
investment power.
(9) Gives effect to footnotes 5 through 8.
6
<PAGE>
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.
ANNETTE M. BECK, age 37, has been a director of Protection One since
January 2000 and has been the President and Chief Operating Officer of
Protection One since July 1999. From October 1998 and January 1999,
respectively, until January 2000, Ms. Beck served as President and Chairman of
the Board of Directors of Kansas Gas and Electric Company, a wholly-owned
subsidiary of Western Resources. She was the Director--Strategic Planning from
1995 through 1998 and Director--Customer Service Operations from August 1997
through September 1998 for Western Resources, Inc. She also served as Vice
President--Customer Service and Electric Operations from October 1998 through
July 1999 for Western Resources, Inc.
ANTHONY D. SOMMA, age 36, has been a director of Protection One since May
1999. Since March 1999, Mr. Somma has been the Secretary and Treasurer of the
Company. From March 1999 through July 1999 he served as Acting Chief Financial
Officer and on such date he was promoted to and continues to serve as Chief
Financial Officer. He served as Manager of Corporate Development at Astra
Resources, a subsidiary of Western Resources from December 1994 through
July 1995. In July 1995, he moved to Western Resources' corporate office in the
Corporate Strategy Department as a Project Manager. He was promoted in
July 1996 to Director of Corporate Strategy, and in October 1998 to Executive
Director of Finance of Western Resources, in which position he served until
joining the Company.
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 has letters of understanding concerning certain terms of
employment with Ms. Beck and Mr. Somma and employment agreements with
Messrs. Mack, Mackenzie, Millstein and Rankin.
Pursuant to their letters of understanding, each dated January 14, 2000,
Ms. Beck and Mr. Somma are initially to receive annual base salaries in the
amounts of $242,339 and $189,614, respectively, and are entitled to participate
in Protection One's standard employee benefits program. Further, the letters
provide that Ms. Beck and Mr. Somma are to receive annual amounts of $44,563 and
$17,825, respectively, and one time payments of $6,880 and $2,847, respectively,
to compensate them for additional expenses incurred by them and to attract them
to the Company. In addition, Ms. Beck and Mr. Somma will receive annual
automobile allowances of $12,861 each. Subject to annual review by the Board of
Directors, Ms. Beck and Mr. Somma will receive stock options to purchase Common
Stock. In 1999, Ms. Beck received 100,000 stock options and Mr. Somma received
50,000 stock options. The letters also set annual targeted incentives for
Ms. Beck and Mr. Somma at 60% of their respective base salaries and additional
base compensation. No specific periods of employment are provided for in such
letters. In addition, the Company has entered into change-in-control agreements
with Ms. Beck and Mr. Somma, each dated December 19, 1999, pursuant to which
each executive has agreed that, should Western Resources announce that it
intends to sell stock of the Company so that it would own, either directly or
through an entity at least 30% controlled by or under common control with it,
less than 50% of the Company's outstanding voting securities ordinarily having
the right to vote in the election of directors ("Voting Securities"), such
executive will continue in the employ of the Company until such transaction has
been abandoned or a change-in-control has occurred. In the event the executive's
employment is terminated
7
<PAGE>
within twelve months following a change-in-control other than by the Company for
Cause or disability or by the executive for Good Reason, subject to certain
conditions, the executive will be entitled to receive, among other things,
approximately three times (i) such executive's annual base salary and (ii) the
average incentive compensation awarded to such executive for the three prior
bonus periods and such executive's employee welfare benefit plans shall continue
in effect for three years or the earlier commencement of equivalent benefits
from a new employer or retirement date of the executive. A "change-in-control"
occurs when (a) any individual or entity other than the Company, a wholly-owned
subsidiary of the Company, Western Resources or an affiliate becomes the
beneficial owner of 50% or more of the Voting Securities; (b) individuals who
constituted the Board of Directors of the Company on the date of the agreement
(and directors who become directors by the approval of at least three quarters
thereof) cease to constitute a majority of the Board of Directors of the
Company; (c) the liquidation or dissolution of the Company; or (d) the sale of
all or substantially all assets of the Company other than to Western Resources
or its affiliates. "Cause" is defined as (a) the willful and continued failure
by the executive to substantially perform his or her duties or (b) the willful
engaging of illegal conduct by the executive which is materially injurious to
the Company. "Good Reason" includes (a) an adverse change in the executive's
status or position; (b) a reduction in the executive's base salary; and (c) the
failure to provide the executive with substantially similar benefits. On January
1st of each year beginning in 2001, each change-in-control agreement is
continually extended so as to cause each such agreement to have a remaining term
of one year, unless the Company or the executive provides notice of termination
at least 90 days prior to such January 1st date.
In addition to employment agreements, the Company has entered into letter
agreements with Messrs. Mack, Mackenzie, Millstein and Rankin, setting forth
certain terms respecting the termination of their employment. The employment of
these persons terminated on March 31, 2000, March 19, 1999, August 25, 1999 and
September 15, 1999, respectively. Pursuant to their employment and letter
agreements, each executive other than Mr. Millstein will receive monthly amounts
of $33,333.33 (Mr. Mack), $42,307.50 (Mr. Mackenzie) and $27,982.33
(Mr. Rankin) for 36 months following such executive's termination date.
Mr. Millstein received a lump sum payment in the amount of $557,758 consisting
of $500,000 paid in compromise of any other compensation due in connection with
the termination of his employment, including salary, bonus and long-term
incentives, and $57,758 for unused vacation. In addition, Messrs. MacKenzie and
Rankin received payments of $44,806 and $29,422, respectively, for unused
vacation and are entitled to the cost of outplacement services. Messrs. Mack and
MacKenzie are entitled to reimbursement for up to $25,000 each for attorney's
fees incurred in connection with the termination of their employment. Mr. Mack
received an additional lump sum severance payment of $100,000, approximately
$29,000 for unused vacation and certain items of personal property, the
aggregate value of which did not exceed $7,500. Upon termination, each such
executive's stock options became fully vested and exercisable for a three year
period following their respective termination dates. Each such 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
$50,000, prior to the later of the first anniversary of the date on which the
officer's employment by Protection One terminates and the date on which the
payments described above are paid in full. Pursuant to Mr. Millstein's
separation agreement, Protection One waived compliance with Mr. Millstein's
agreement not to compete in connection with his employment with ATX
Technologies, Inc.
SUMMARY OF EXECUTIVE COMPENSATION
The following table summarizes the compensation for the fiscal years ended
December 31, 1999, 1998, 1997 and September 30, 1997 of Protection One's former
Chief Executive Officers, former executive officers Messrs. Millstein and Rankin
and the two other executive officers of Protection One (the "named
executive officers").
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION(10)
------------------------------------------------------ ----------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION(S) YEAR(7) SALARY ($) BONUS ($)(8) ($)(9) GRANTED (#) ($)(11)
- - - ------------------------------------------ -------- ----------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Annette M. Beck(1) ....................... 1999 104,194 -- 10,970 100,000 16,580
President and Chief Operating Officer
Anthony D. Somma(2) ...................... 1999 127,943 -- 8,093 50,000 11,017
Chief Financial Officer, Secretary and
Treasurer
John E. Mack III(3) ...................... 1999 306,513 -- -- 25,600 23,179
Former Chief Executive Officer 1998 273,050 29,788 -- 125,000 6,380
1997* 214,452 1,590,758 -- -- --
1997 199,172 -- -- 25,000 1,159
James M. Mackenzie, Jr.(4) ............... 1999 121,417 -- -- 62,600 1,575,078
Former President and Chief Executive 1998 381,250 41,690 -- 190,000 6,864
Officer 1997* 315,976 1,616,232 -- -- --
1997 300,155 -- -- 25,000 1,727
Thomas K. Rankin(5) ...................... 1999 222,167 -- -- 25,600 1,048,962
Former President and Chief Operating 1998 273,050 29,788 -- 125,000 4,189
Officer 1997* 214,453 1,590,758 -- -- --
1997 199,172 -- -- 25,000 --
Steven A. Millstein(6) ................... 1999 177,582 -- -- -- 565,896
Former President--Mobile Division 1998 270,800 29,788 -- 125,000 13,519
</TABLE>
- - - ------------------------------
(1) Annette M. Beck joined the Company as President and Chief Operating Officer
on July 15, 1999.
(2) Anthony D. Somma joined the Company on March 19, 1999.
(3) John E. Mack, III's employment with the Company terminated on March 31,
2000.
(4) James M. Mackenzie, Jr.'s employment with the Company terminated on
March 19, 1999.
(5) Thomas K. Rankin's employment with the Company terminated on September 15,
1999.
(6) Steven A. Millstein became an Executive Vice President of the Company on
November 24, 1997. Prior to such date, Mr. Millstein served, and he
continued to serve, as the President of WestSec, Inc., and Westar Security,
Inc., which became subsidiaries of the Company on such 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 $206,877 and other compensation in the amount of $225,628
(consisting of $105,728 representing compensation for his relocation to
Dallas, Texas, $110,000 representing a retention bonus earned in fiscal 1997
and paid in fiscal 1998, and $9,900 representing an automobile allowance).
In 1998, Mr. Millstein became President of the Mobile Division of the
Company. Mr. Millstein's employment with the Company terminated on
August 25, 1999.
(7) Information given for "1997*" relates to the fiscal year ended December 31,
1997. Information given for 1997 relates to the fiscal year ended
September 30, 1997. 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 in 1997.
(8) Bonus amounts reflect amounts earned during a period and may have been paid
in subsequent periods.
(9) Represents amounts paid to offset the impact of certain taxes on amounts
paid to compensate for benefits lost from previous employment and car
allowances.
(10) The aggregate number (and value) for each of the executive officers at
December 31, 1999 for outstanding restricted stock previously awarded was:
4,156 ($8,052) for each of Messrs. Mack, Mackenzie and Rankin.
(11) The amounts disclosed in this column for 1999 include: (a) company
contributions in the amounts of $587, $498, $1,790, $1,790 and $1,056 for
Ms. Beck and Messrs. Somma, Mack, Mackenzie and Millstein, respectively,
under the 401(k) plan; (b) insurance
9
<PAGE>
premiums paid by the Company in the amounts of $775, $797, $10,235, $3,412
and $7,676 for Ms. Beck and Messrs. Somma, Mack, Mackenzie and Rankin,
respectively; (c) an automobile allowance from the Company in the amount of
$3,760, $5,139, $6,250, $2,000, $4,500 and $7,082 for Ms. Beck and
Messrs. Somma, Mack, Mackenzie, Rankin and Millstein, respectively;
(d) additional benefit funds of $11,458 and $4,583 for Ms. Beck and
Mr. Somma, respectively, to compensate for benefits lost from their previous
employment; (e) payments for unused vacation of $4,904, $44,806, $29,422 and
$57,758 for Messrs. Mack, Mackenzie, Rankin and Millstein, respectively; and
(f) severance payments in the amount of $1,523,070, $1,007,364 and $500,000
to Messrs. Mackenzie, Rankin and Millstein, respectively, upon termination
of their employment with the Company, pursuant to their employment
agreements. Mr. Millstein's severance payment reflects the amount paid in
compromise of any other compensation due in connection with the termination
of his employment, including salary, bonus and long-term incentives.
STOCK OPTION GRANTS
The following table sets forth certain information concerning grants of
stock options made during the year ended December 31, 1999 to the executive
officers named in the Summary Compensation Table.
OPTION GRANTS IN LAST YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
--------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE PRESENT
NAME GRANTED LAST YEAR ($/SH)(2) DATE VALUE ($)(3)
- - - ---- ---------- ------------- ----------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Annette M. Beck.................. 100,000 9.1% 6.125 7/15/09 422,000
Anthony D. Somma................. 50,000 4.6% 6.125 7/15/09 211,000
John E. Mack, III................ 25,600 2.3% 8.9275 1/21/09 146,688
James M. Mackenzie, Jr........... 62,600 5.7% 8.9275 1/21/09 358,698
Thomas K. Rankin................. 25,600 2.3% 8.9275 1/21/09 146,688
Steven A. Millstein.............. -- -- -- -- --
</TABLE>
- - - ------------------------
(1) Ms. Beck and Mr. Somma's options were granted on July 15, 1999. All such
options have 10 year terms, vest in increments of one-third of total number
of options granted on the first, second and third anniversaries of the date
of grant and are currently non-exercisable. All unexercised options
terminate upon termination of the holder's employment with the Company.
Messrs. Mack, Mackenzie and Rankin's options were granted on January 21,
1999. All such options were granted with ten year terms. On the respective
dates of termination of their employment, all such options became fully
vested and exercisable for a period of three years from such dates.
(2) The exercise price was determined by reference to the closing price of the
Common Stock reported on the New York Stock Exchange on the respective dates
of grant.
(3) The grant date valuation was calculated using the Black-Scholes option
pricing model and assumptions called for by paragraph 19 and Appendix B of
FAS123. This calculation does not necessarily follow the same method and
assumptions that the Company uses in valuing long term incentives for other
purposes. In calculating the grant date valuation the following assumptions
were made: for options granted on January 21, 1999, actualized stock
volatility of 62.29%; a 6-year time of exercise option term; a risk-free
interest rate of 6.76%; an average dividend yield of 0.00% and vesting
restrictions of 3.00 years; for options granted on July 15, 1999, actualized
stock volatility of 70.80%; a 6-year time of exercise option term; a
risk-free interest rate of 6.80%; an average dividend yield of 0.00% and
vesting restrictions of 3.00 years. These numbers are calculated based upon
the requirements promulgated by the Securities and Exchange Commission, and
do not represent an estimate by the Company of future stock price growth.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST YEAR AND 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 year end. No stock option was exercised by any such
executive officer during the year ended December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF STOCK VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 12/31/99 AT 12/31/99 ($)(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - - ---- ------------------------- -------------------------
<S> <C> <C>
Annette M. Beck................................... --/100,000 --/--
Anthony D. Somma.................................. --/50,000 --/--
John E. Mack, III................................. 252,866/58,734 --/--
James M. Mackenzie................................ 395,600/-- --/--
Thomas K. Rankin.................................. 311,600/-- --/--
Steven A. Millstein............................... 125,000/-- --/--
</TABLE>
- - - ------------------------
(1) As of December 31, 1999, none of the options granted were in-the-money. Fair
market value was calculated based upon the closing sales price of the Common
Stock as reported on the New York Stock Exchange on December 31, 1999
($1.9375). There is no guarantee that if and when any such option is
exercised, the option will have such value.
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, 1999.
The compensation of Protection One's Chief Executive Officer, like the other
executive officers, consists of a combination of salary and bonuses. James M.
Mackenzie was Chief Executive Officer until March 19, 1999. After March 19,
1999, John E. Mack, III began serving as Chief Executive Officer and continued
in that position until March 31, 2000. The compensation of the Company's Chief
Executive Officer is determined by the same criteria as used in determining the
compensation of all of the Company's executive officers.
Protection One has entered into employment agreements with Messrs. Mack,
Mackenzie, Rankin and Millstein, and letters of understanding concerning certain
terms of their employment with Ms. Beck and Mr. Somma. The base salary for each
such executive officer is set forth in his or her employment agreement or letter
of understanding, subject to adjustments by the Compensation Committee. The base
salaries of other executive officers in 1999 was based upon the Compensation
Committee's assessment of their experience, management skills and individual
performance, as well as relevant market factors.
In addition to base salaries, executive officers may receive bonuses paid in
cash and in common stock, as well as other stock based compensation. In
determining the bonuses of 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 stock appreciation and cash flow per share. The
Compensation Committee believes linking executive compensation to the
performance of the Company's common stock and cash flow aligns the interests of
the executive officers with those of shareholders. In addition, the Compensation
Committee reviews the business plans and projections prepared by management and
compares the Company's actual performance to the objective criteria set forth in
such plans and projections. Subjective criteria include the Company's
11
<PAGE>
customer service performance, approach to cost management, approach to expanding
the customer base, management of infrastructure enhancements and success in
capital formation. The Compensation Committee also considers individual
performance. Based on the Compensation Committee's assessment of these criteria,
no executive officers were awarded bonuses in 1999.
In setting and adjusting the compensation of the Company's executive
officers, the Compensation Committee considers compensation paid to other
executive officers with comparable skills and experience in the security
industry and other service industries. For this purpose, the Company's outside
compensation advisor compiled and presented to the Compensation Committee market
data concerning compensation of executive officers of companies deemed
comparable on various bases and made recommendations to the Compensation
Committee. On the basis of those recommendations, the Compensation Committee
reviewed and adjusted executive compensation accordingly to better reflect the
market compensation for each executive officer on an individual basis based on
experience and skill. In structuring the Company's compensation plans, the
Compensation Committee takes into consideration Section 162(m) (which disallows
the deduction of compensation in excess of $1,000,000 except for incentive
payments based upon performance goals) of the Internal Revenue Code and other
factors which it deems appropriate. As a result, some, but not all, of the
Company's compensation plans comply with Section 162(m).
Howard A. Christensen, Chairman
Maria de Lourdes Duke
Carl M. Koupal, Jr.
James Q. Wilson
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.
12
<PAGE>
PERFORMANCE GRAPH
The following chart compares the cumulative total stockholder returns on the
Common Stock since December 31, 1994 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 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, and excludes, for 1999, Alarmguard Holdings, Inc.
(included in last year's proxy statement), due to its having been acquired in
1999. 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 December 31, 1994 and
that all dividends were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PROTECTION ONE, INC. PEER GROUP RUSSELL 2000
<S> <C> <C> <C>
Dec-94 $100.00 $100.00 $100.00
Dec-95 $210.26 $121.72 $127.49
Dec-96 $202.56 $105.04 $154.73
Dec-97 $369.56 $158.47 $203.91
Dec-98 $279.72 $133.54 $190.75
Dec-99 $63.31 $87.93 $187.92
</TABLE>
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 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, 1999, 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH WESTERN RESOURCES
As described above, pursuant to the Contribution Agreement between the
Company and Western Resources, Western Resources has agreed to certain
arrangements relating to the election of directors of
13
<PAGE>
Protection One. See "Election of Directors-Nominees for Election." In addition,
during the 10-year period following November 24, 1997, 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.
A tax sharing agreement between the Company and Western Resources provides
for the payment to the Company by Western Resources for tax benefits utilized by
Western Resources. Accordingly, a receivable of $31.1 million at December 31,
1999 from Western Resources reflects a receivable of $20.3 million for the tax
benefit utilized by Western Resources in its 1998 consolidated income tax
return. The balance of the receivable reflects the estimated benefit Western
Resources expects to utilize in its 1999 consolidated income tax return. In
February 2000, the Company received payment from Western Resources in the amount
of $29.2 million for the $20.3 million 1998 tax receivable and an additional
intercompany receivable of $8.9 million, reflecting the balance of a
$12.6 million 1999 intercompany receivable relating to the acquisition of
Protection One, reduced by charges under the service agreement with Western
Resources decscribed below. The payment was comprised of certain of Protection
One Alarm Monitoring Inc.'s ("Monitoring") outstanding debt securities that
Westar Capital had acquired with a market value of approximately $15 million
(including 6 3/4% Convertible Senior Subordinated Notes due 2003 convertible
into 873,501 shares of Common Stock) and a promissory note in the principal
amount of approximately $14.2 million, payable in cash or the delivery of
certain of Monitoring's debt securities, with a variable interest rate and a
maturity date of December 31, 2000. The variable interest rate is tied to the
rate on the Company's senior credit facility, which was 8.2% on February 29,
2000.
During the third quarter of 1999, the Company entered into a service
agreement with Western Resources. Pursuant to this agreement Western Resources
will provide administrative services including accounting, human resources,
legal, facilities and technology. During 1999, the Company incurred charges of
approximately $2 million for these services, which were based upon various
hourly charges, negotiated fees and out-of-pocket expenses. These charges are
expected to be approximately $6 million in 2000.
On February 29, 2000, the Company sold its European operations and certain
investments to Westar Capital. The consideration received was comprised of
approximately $183 million in cash and certain of Monitoring's outstanding debt
securities that Westar Capital had acquired with a market value of approximately
$61 million (including 6 3/4% Convertible Senior Subordinated Notes due 2003
convertible into 3,554,560 shares of Common Stock). Westar Capital agreed to pay
the Company a portion of the net gain, if any, on a subsequent sale of the
business on a declining basis over the four years following the date of the
Purchase Agreement. The cash proceeds of the sale were used to reduce the
$240 million outstanding balance under the $250 million senior credit facility
provided by Westar Capital to Monitoring. Westar Capital paid approximately
$102 million for the aggregate of approximately $76 million of Monitoring's debt
securities paid to the Company as described above. The Company paid an aggregate
of approximately $228.5 million for the European operations and other
investments sold to Westar Capital.
On December 17, 1999, Westar Capital became the lender under Monitoring's
senior credit facility. On February 29, 2000, Monitoring and Westar Capital
entered into a Second Amendment to the Credit Agreement dated December 21, 1998
(the "Credit Amendment"), that reduced the commitment under the senior credit
facility from $250 million to $115 million, changed the maturity date from
December 21, 2001 to January 2, 2001 and changed various other provisions of the
facility, including the interest for borrowing and calculation of financial
covenants. The Credit Amendment also provided that the commitment available
under the facility may be increased by up to $40 million to finance certain
acquisitions by Monitoring approved by Westar Capital. As of December 31, 1999,
approximately $225 million was drawn under the facility. Based on the
recommendation of a special committee of the Board of Directors, the sale of the
Company's European operations and the entering into of the Credit Amendment were
approved by the Board of Directors, excluding Messrs. Koupal and Lake. The
special committee, comprised of
14
<PAGE>
Ms. Duke and Messrs. Enis and Wilson, received a fairness opinion from an
investment banker with regard to the sale of the European operations.
In the third quarter of 1999, the Company signed a letter of intent with
Paradigm Direct LLC ("Paradigm") concerning a three-year marketing relationship.
The marketing agreement was entered into as of February 28, 2000. Westar Capital
has a 40% ownership interest in Paradigm. The agreement contemplates that the
Company will purchase customer accounts from Paradigm. In addition, the Company
will purchase leads that satisfy certain criteria. In connection with the
agreement, the Company's marketing personnel were transferred to Paradigm.
During the third quarter of 1999, the Company paid to Paradigm approximately
$1 million in connection with start up costs relative to this program and has
prepaid approximately $1 million for anticipated account purchases. While the
Company has budgeted $4.5 million for payments in 2000 in connection with this
relationship, it is unable to estimate the amount of such payments due to the
recent inception of this relationship.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
In January of 2000, the Company made a personal loan to John E. Mack III, a
director and former Chief Executive Officer of the Company in the principal
amount of $150,000 with interest at the variable interest rate equal to the rate
the Company pays on its revolving credit facility. During 1998, the Company made
a personal loan to Thomas Rankin, the former President of the Company. The
largest aggregate amount of indebtedness outstanding during 1999 was $150,000.
The balance of this loan, together with interest at the rate of 6.5%, was
$140,366 at December 31, 1999.
PROPOSAL TO APPROVE AMENDMENT AND RESTATEMENT
OF EMPLOYEE STOCK PURCHASE PLAN
On August 2, 1995, the Company's Board of Directors adopted the Protection
One, Inc. Employee Stock Purchase Plan, subject to stockholder approval, and
such stockholder approval was obtained on January 26, 1996. On October 26, 1999,
the Company's Board of Directors approved an amendment and restatement of the
Employee Stock Purchase Plan, effective as of April 1, 2000, subject to
stockholder approval. The amended and restated Employee Stock Purchase Plan
(including the subsequent amendment described below, the "ESPP") is similar in
many respects to the plan as originally approved by the stockholders. The major
differences are: (i) the 90-day service requirement for eligibility to
participate has been eliminated, (ii) the requirement that purchase periods be
six months in duration has been eliminated, (iii) the 5,000 share maximum on the
number of shares that can be purchased by any participant in any purchase period
and the 25% limit on the percentage of salary that may be contributed by
participants have been eliminated (instead the committee responsible for
administering the plan has been given authority to set maximums and minimums),
(iv) lump sum contributions will be permitted in addition to payroll deductions
(subject to the prescribed maximums and minimums), (v) the committee responsible
for administering the plan has been given the authority to credit interest on
employee contributions, and (vi) certain restrictions on the ability of the
Board of Directors to amend the plan without stockholder approval (largely
reflecting federal securities law requirements that are no longer applicable)
have been eliminated. Subsequent to adoption of the ESPP, the Company's Board of
Directors approved, subject to stockholder approval, an amendment thereto that
expands eligibility to employees of parents (as defined in the ESPP) of the
Company.
A copy of the ESPP is attached to this Proxy Statement as Appendix A and is
incorporated herein by reference. The following description of the ESPP is a
summary and does not purport to be a complete description. See Appendix A for
more detailed information.
15
<PAGE>
PURPOSE OF ESPP
The ESPP provides a means for eligible employees of the Company and
designated parents and subsidiaries to purchase shares of the Company's Common
Stock under favorable terms through payroll deductions or cash payments. The
Board of Directors believes that the ESPP promotes the interests of the Company
and its stockholders by assisting the Company in attracting, retaining and
stimulating the performance of employees and by aligning employees' interests
through their purchases of Common Stock with the interests of stockholders.
Stockholder approval of the ESPP is required in order for options granted under
the ESPP to qualify for favorable tax treatment under the Code.
SHARES SUBJECT TO THE PLAN
The ESPP provides that the aggregate number of shares of the Company's
Common Stock that may be sold under the ESPP is 650,000, subject to adjustment
from time to time for stock dividends, recapitalization, merger, spin-off, and
certain other changes in capitalization as provided in the ESPP. This maximum
remains unchanged from the maximum set forth in the ESPP as originally adopted.
As of March 31, 2000, there were 457,154 shares available for future use.
ADMINISTRATION
The ESPP is currently administered by the Compensation Committee. The
Compensation Committee is authorized to administer and interpret the ESPP and to
make such rules and regulations as it deems necessary to administer the ESPP.
ELIGIBILITY
The ESPP is an employee benefit program that enables qualified employees of
the Company and its parents and subsidiaries, in each case designated by the
Compensation Committee, to purchase shares of Common Stock at a discount through
payroll deductions or cash payments without incurring broker commissions. To
participate, an employee must be employed by the Company or one of its
designated parents or designated subsidiaries at the beginning of the offering
period and the employee's customary employment must be for more than 20 hours
each week and five months in any calendar year (unless the Compensation
Committee determines otherwise on a uniform and nondiscriminatory basis). An
employee is not eligible to continue participation in the ESPP in the event his
or her employment is voluntarily or involuntarily terminated, or if such
employee owns or will own, as a result of such participation, shares possessing
5% or more of the total combined voting power or value of all classes of stock
of the Company or any related corporation. Employees represented by bargaining
units do not currently participate in the ESPP. As of March 31, 2000,
approximately 2,975 of the Company's employees are eligible to participate in
the ESPP, including each of the executive officers. Non-employee directors of
the Company are not eligible to participate in the ESPP.
STOCK PURCHASES
The ESPP is implemented through a series of offerings. The length of each
offering period is established by the Compensation Committee, but may not exceed
27 months. During these offering periods, participating employees accumulate
funds in an account used to buy Common Stock through payroll deductions or cash
payments at a rate selected by the employee (subject to such maximums and
minimums as the Compensation Committee may prescribe). No participating employee
may be granted an option to purchase Common Stock that permits the employee to
purchase in any calendar year under the ESPP shares of Common Stock with an
aggregate fair market value (determined at the time such option is granted) in
excess of $25,000.
At the end of each offering period, the market price of the Company's Common
Stock is determined and the participating employees' accumulated funds
(including any interest that may be credited under
16
<PAGE>
rules prescribed by the Compensation Committee) are used to purchase the
appropriate number of shares of Common Stock. The purchase price per share of
Common Stock under the ESPP is established by the Compensation Committee, but
may not be less than the lower of 85% of the per share fair market value of the
Common Stock on either the first day of the offering period or the last day of
the offering period. The average of the high and low prices of a share of Common
Stock on April 3, 2000 was $1.90625 as reported on the New York Stock Exchange.
AMENDMENT AND TERMINATION
The Board of Directors has the power to amend, suspend or terminate the
ESPP, provided that the Board may not amend the ESPP without stockholder
approval if such approval is required by Section 423 of the Internal Revenue
Code of 1986, as amended.
EFFECTIVE DATE; TERM OF THE PLAN
The ESPP shall become effective April 1, 2000, subject to stockholder
approval. The ESPP will continue in effect until all authorized shares have been
issued, unless sooner terminated by the Board of Directors.
FEDERAL INCOME TAX CONSEQUENCES
The Company intends that the ESPP qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"). Section 423 allows an employer to grant options to its employees to
purchase company stock at a stipulated price without having the employees
realize taxable income at the time the option is granted or when exercised. The
basis of the stock received on exercise of an option under the ESPP is the
exercise price paid for the stock. The Code imposes a holding period for
favorable tax treatment upon disposition of Common Stock acquired under the ESPP
equal to the later of two years after the grant date or one year after the
purchase date. When the Common Stock is sold after this holding period, the
employee will realize ordinary income up to the amount of any discount (up to a
maximum of 15%) from the fair market value of Common Stock as of the grant date.
Any further gain is taxed at long term capital gain rates. If the stock is sold
before the holding period expires, the employee will realize ordinary income to
the extent of the difference between the price actually paid for the stock and
the fair market value of the stock at the purchase date, regardless of the price
at which the stock is sold; and any further gain would be capital gain (short
term or long term, depending on the holding period). If the sale price is less
than the fair market value of the stock on the purchase date, the employee will
realize a capital loss equal to such difference.
The Company may not take a deduction for the difference between the fair
market value of the Common Stock on the date of purchase by the employee and the
purchase price paid for the Common Stock by the employee unless the employee
disposes of the stock before the statutory holding periods expire.
VOTE REQUIRED FOR APPROVAL
Approval of the amendment and restatement of the ESPP 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 such approval. Accordingly, although not counted
as a vote "for" or "against" such approval, an abstention on such approval will
have the same effect as a vote "against" such approval. Broker non-votes will
not be counted in determining the number of shares present and entitled to vote
on such approval, and will have no effect on the outcome. The vote by Westar
Capital, which beneficially owns in excess of 80% of the outstanding shares of
Common Stock entitled to vote at the
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meeting, for the approval of the amendment and restatement of the ESPP will
result in such approval, regardless of how any other stockholder may vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENT AND RESTATEMENT OF THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit and Finance Committee of the Board of Directors recommended and
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 year 2000. 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 Company will select
other independent public accountants for the Company.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2001 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 22, 2000 in order to be
considered for inclusion in the proxy statement and form of proxy relating to
such meeting. In addition, if a stockholder intends to present a proposal at the
2001 Annual Meeting other than pursuant to Rule 14a-8 under the Exchange Act,
and if the proposal is not received by the Company's Secretary by March 7, 2001,
then the proxies designated by the Board of Directors of the Company for the
2001 Annual Meeting of Shareholders may vote in their discretion on any such
proposal any shares for which they have been appointed proxies without mention
of such matter in the proxy statement for such meeting or on the proxy card for
such meeting.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented at the
Meeting other than the matters 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.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE 2000 ANNUAL MEETING, YOU ARE
REQUESTED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD. YOUR PROMPT RESPONSE
WILL BE MUCH APPRECIATED.
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APPENDIX A
PROTECTION ONE, INC.
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF APRIL 1, 2000)
1. PURPOSE.
The purpose of this Plan is to provide eligible employees the opportunity to
purchase Common Stock at a discount on a basis that qualifies for the tax
treatment prescribed by Code Section 423.
2. DEFINITIONS.
The following terms, when used in this Plan, shall have the following
meanings:
(a) "Board" or "Board of Directors" means the Board of Directors of the
Company, as constituted from time to time.
(b) "Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to the Code or to a particular section of the Code shall
include references to any related Treasury Regulations and rulings and to
successor provisions.
(c) "Committee" means the Compensation Committee of the Board or such
other committee as may be appointed by the Board of Directors to administer
this Plan pursuant to the provisions of Section 3(a) of this Plan.
(d) "Common Stock" means common stock of the Company.
(e) "Company" means Protection One, Inc., a Delaware corporation, its
successors and assigns.
(f) "Fair Market Value" on a particular date means the average of the
high and low sale prices of the Common Stock in trading on the date in
question as reported by THE WALL STREET JOURNAL or another reputable source
designated by the Committee; provided that if there were no sales on such
date reported as provided above, such prices shall be computed as of the
most recent prior day for which a sale was so reported. If the foregoing
method of determining fair market value should be inconsistent with Code
Section 423, then "Fair Market Value" shall be determined by the Committee
in a manner consistent with such section of the Code and shall mean the
value as so determined.
(g) "General Counsel" means the General Counsel of the Company serving
from time to time.
(h) "Parent" means a parent corporation as defined in Section 424(e) of
the Code, including a corporation which becomes such a parent in the future.
(i) "Plan" means the Protection One, Inc. Employee Stock Purchase Plan
set forth in these pages, as amended from time to time.
(j) "Plan Compensation" means such compensation of a participant as
prescribed by the Committee from time to time for purposes of this Plan
consistent with the requirements of Code Section 423.
(k) "Subsidiary" means a subsidiary as defined in Code Section 424(f),
including a corporation which becomes such a subsidiary in the future.
3. ADMINISTRATION.
(a) The Plan shall be administered by a committee of the Board
consisting of two or more directors of the Company, as appointed from time
to time by the Board.
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(b) Subject to the provisions of this Plan, the powers of the Committee
shall include having the authority, in its discretion, to:
(i) define, prescribe, amend and rescind rules, regulations,
procedures, terms and conditions relating to this Plan; and
(ii) make all other determinations necessary or advisable for the
administration of this Plan, including but not limited to interpreting
this Plan, correcting defects, reconciling inconsistencies and resolving
ambiguities.
(c) The interpretation by the Committee of the terms and provisions of
this Plan, and its administration of this Plan, and all action taken by the
Committee, shall be final, binding and conclusive on the Company, its
stockholders, Parent, Subsidiaries, all participants and employees, and upon
their respective successors and assigns, and upon all other persons claiming
under or through any of them.
(d) Members of the Board and members of the Committee acting under this
Plan shall be fully protected in relying in good faith upon the advice of
counsel and shall incur no liability except for gross or willful misconduct
in the performance of their duties.
4. STOCK SUBJECT TO THIS PLAN.
(a) Subject to Section 4(c) of this Plan, the aggregate number of shares
of Common Stock which may be sold under this Plan is 650,000 (six hundred
fifty thousand).
(b) If the number of shares of Common Stock that participating employees
become entitled to purchase is greater than the number of shares of Common
Stock that are offered in a particular offering or that remain available
under this Plan, the available shares of Common Stock shall be allocated by
the Committee among such participating employees in such manner as it deems
fair and equitable consistent with the requirements of Code Section 423.
(c) In the event of any change in the Common Stock, through
recapitalization, merger, consolidation, stock dividend or split,
combination or exchange of shares, spin off or otherwise, the Committee may
make such equitable adjustments in this Plan and the then outstanding
offerings as it deems necessary and appropriate including, but not limited
to, changing the number of shares of Common Stock reserved under this Plan,
and the price of the current offering; provided that any such adjustments
shall be consistent with Code Sections 423 and 424.
(d) Shares of Common Stock which may be delivered under this Plan may be
obtained by the Company from its treasury, by purchases in the open market
or from private sources, or by issuing authorized but unissued shares of its
Common Stock. Shares of authorized, but unissued Common Stock, may not be
delivered under this Plan if the purchase price thereof is less than the par
value (if any) of the Common Stock at the time. The Committee may (but need
not) provide at any time, or from time to time (including without limitation
upon or in contemplation of a change in control), for a number of shares of
Common Stock equal in number to the number of shares then subject to options
under this Plan, or expected to be subject to options under this Plan in the
then pending offering(s), to be issued or transferred to, or acquired by, a
trust (including but not limited to a grantor trust) for the purpose of
satisfying the Company's obligations under such options, and, unless
prohibited by applicable law, such shares held in trust shall be considered
authorized and issued shares with full dividend and voting rights,
notwithstanding that the options to which such shares relate might not be
exercisable at the time. No fractional shares of Common Stock may be issued
or sold under this Plan.
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5. ELIGIBILITY.
All employees of the Company, and any designated Parent and any designated
United States Subsidiary, in each case, designated by appropriate written
resolution of the Committee from time to time, will be eligible to participate
in this Plan, in accordance with and subject to such rules and regulations as
the Committee may prescribe; provided, however, that (a) such rules shall
neither permit nor deny participation in this Plan contrary to the requirements
of the Code (including but not limited to Code Section 423(b)(3), (4) and
(8) thereof), (b) no employee shall be eligible to participate in this Plan if
his or her customary employment is 20 hours or less per week or for not more
than 5 months in any calendar year, unless the Committee determines otherwise on
a uniform and nondiscriminatory basis, (c) no employee may be granted an option
under this Plan if such employee, immediately after the option is granted, owns
stock possessing 5% or more of the total combined voting power or value of all
classes of stock of his or her employer corporation or any Parent or Subsidiary
corporation (within the meaning of Code Section 423(b)(3)), and (d) no employee
represented by a particular bargaining unit may be granted an option under this
Plan if the applicable bargaining unit representative has declined the
opportunity for the bargaining unit to participate in this Plan. For purposes of
the preceding sentence, the rules of Code Section 424(d) shall apply in
determining the stock ownership of an employee, and stock which the employee may
purchase under outstanding options (whether or not such options qualify for the
special tax treatment afforded by Code Section 421(a)) shall be treated as stock
owned by the employee.
6. OFFERINGS; PARTICIPATION.
The Company may make offerings of up to 27 months' duration each, to
eligible employees to purchase Common Stock under this Plan, until all shares
authorized to be delivered under this Plan have been exhausted or until this
Plan is sooner terminated by the Board. Subject to the preceding sentence, the
duration and commencement date of any offering under this Plan shall be
determined by the Committee in its sole discretion. Subject to such rules,
procedures and forms as the Committee may prescribe and to the requirements of
Code Section 423 and other applicable law, an eligible employee may participate
in an offering at such time(s) as the Committee may permit by authorizing a
deduction from his or her Plan Compensation for such purpose, provided that the
aggregate of all such deductions and any lump-sum contribution during an
offering period may not exceed such maximum amount and/or percentage of Plan
compensation as the Committee may designate. The Committee may at any time
suspend or accelerate the completion of an offering if required by law or deemed
by the Committee to be in the best interests of the Company, including in the
event of a change in ownership or control of the Company, its Parent or any
Subsidiary. The Company's obligation to sell and deliver Common Stock under this
Plan shall be subject to the approval of any governmental authority whose
approval the General Counsel determines is necessary or advisable to obtain in
connection with the authorization, issuance or sale of such Common Stock.
7. PAYROLL DEDUCTIONS; LUMP-SUM CONTRIBUTION.
(a) The Company will maintain accounts on its books for all
participating employees. All employee contributions shall be credited to
such accounts. Employee contributions credited to the accounts of
participating employees need not be segregated from other corporate funds
and may be used for any corporate purpose.
(b) At such times as the Committee may permit and subject to such rules,
procedures and forms as the Committee may prescribe, an employee may
increase, decrease or suspend his or her payroll deduction during an
offering, or may withdraw the balance of the account maintained under the
Plan for such employee and thereby withdraw from participation in an
offering.
(c) In addition to payroll deductions, a participating employee may
elect at any time during an offering period to make a single lump-sum
contribution to the account maintained under the Plan for such employee,
subject to such rules, procedures and forms as the Committee may prescribe.
The
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limit on payroll deductions set forth in Section 6 above shall apply to
lump-sum contributions as well, so that the total contributed to the account
maintained under the Plan for the employee, whether by payroll deduction or
by lump-sum contribution, shall not in the aggregate exceed such maximum
amount and/or percentage of Plan Compensation as the Committee may designate
pursuant to Section 6 of this Plan.
(d) The Committee shall determine from time to time in its sole
discretion whether, and if so at what rate and under what circumstances,
payroll deductions and/or lump sum contributions contributed to the account
shall accrue interest.
(e) No employee shall be permitted to make any elective contribution or
employee contribution to this Plan for a period of 12 months after the
payment to such employee of a hardship distribution (as described in
Treasury Regulation Section 1.401(k)-1(d)(2)(iv)(B)(4)) from a plan of the
Company or a related party within the provisions of Code Section 414(b),
(c), (m) or (o) containing a cash or deferred arrangement under Code
Section 401(k). The foregoing sentence shall not apply if and to the extent
the General Counsel determines it is not necessary to qualify any such plan
as a cash or deferred arrangement under Code Section 401(k).
(f) Any balance remaining in any employee's account at the end of an
offering period will be carried forward into the account maintained under
the Plan for the employee for the following offering period. In no event
will the balance carried forward be equal to or greater than the purchase
price of one share of Common Stock as determined under Section 8(c) of this
Plan. Any excess shall be refunded to the participant. Upon termination of
this Plan, all amounts in the accounts of participating employees shall be
carried forward into their accounts under a successor plan, if any, or
refunded to them, as the Committee may decide.
(g) In the event of the termination of a participating employee's
employment for any reason, his or her participation in any offering under
this Plan shall cease, no further amounts shall be deducted pursuant to this
Plan and the balance in the employee's account shall be paid to the
employee, or, in the event of the employee's death, to the employee's
beneficiary. For purposes of this Plan, a participating employee's
beneficiary shall be his or her beneficiary under applicable state payroll
laws.
8. PURCHASE; LIMITATIONS.
(a) Within the limitations of Section 8(d) of this Plan, each employee
participating in any offering under this Plan will be granted an option,
upon the effective date of such offering, for as many full shares of Common
Stock as the amount of his or her account (including any contribution made
by means other than payroll deductions) at the end of the offering can
purchase.
(b) As of the last day of the offering period, the account of each
participating employee shall be totaled. Subject to the provisions of
Sections 7(b) and 8(d) of this Plan, if such account contains sufficient
funds as of that date to purchase one or more full shares of Common Stock at
the price determined under Section 8(c) of this Plan, the employee shall be
deemed to have exercised an option to purchase the largest number of full
shares of Common Stock at the price determined under Section 8(c) of this
Plan that the balance of the account maintained under the Plan for the
employee will permit; such employee's account will be charged for the amount
of the purchase and for all purposes under this Plan the employee will be
deemed to have acquired the shares on that date; and either a stock
certificate representing such shares will be issued to him or her, or the
Company's registrar will make an entry on its books and records evidencing
that such shares have been duly issued or transferred as of that date, as
the Committee may direct. Notwithstanding any provision of this Plan to the
contrary, the Committee may but need not permit fractional shares to be
purchased under this Plan provided no certificates may be issued for
fractional shares.
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(c) The Committee shall determine before the first day of any offering
period under this Plan the purchase price of shares of Common Stock which
may be sold under the respective offering, subject to the conditions set
forth in Section 8(c) of this Plan and Code Section 423. The purchase price
of shares of Common Stock which may be sold under this plan shall be no less
than (i) an amount not less than 85% (eighty-five percent) of the Fair
Market Value as of the first day of the offering period, or if such day is
not a day for which Fair Market Value is available, then the next succeeding
day on which such Fair Market Value is available, (ii) an amount not less
than 85% (eighty-five percent) of the Fair Market Value as of the last day
of the offering period, or if such day is not a day for which Fair Market
Value is available, then the next succeeding day on which such Fair Market
Value is available, (iii) the lesser of the amounts described in Sections
8(c)(i) and 8(c)(ii) of this Plan, or (iv) the minimum amount that complies
with Code Section 423.
(d) In addition to any other limitations set forth in, or authorized by
the Committee under, this Plan, (i) no employee may purchase in any offering
period under this Plan more than the number of shares of Common Stock
determined by dividing the lesser of the employee's Plan Compensation as of
the first day of the offering period or $25,000 by the Fair Market Value of
a share of Common Stock on that day, and (ii) no employee may be granted an
option under this Plan which permits his or her rights to purchase stock
under this Plan, and any other stock purchase plan of his or her employer
corporation and its parent and subsidiary corporations that is qualified
under Code Section 423, to accrue at a rate which exceeds $25,000 of Fair
Market Value of such stock (determined at the time such option is granted)
for each calendar year in which the option is outstanding at any time. The
Committee may further limit the amount of Common Stock which may be
purchased by any employee during an offering period in accordance with Code
Section 423(b)(5).
9. NO TRANSFER.
(a) No option, right or benefit under this Plan may be transferred by a
participating employee, whether by will, the laws of descent and
distribution, or otherwise, and all options, rights and benefits under this
Plan may be exercised during the participating employee's lifetime only by
such employee.
(b) Book entry accounts and certificates for shares of Common Stock
purchased under this Plan may be maintained or registered, as the case may
be, only in the name of the participating employee or, if such employee so
indicates on his or her payroll deduction authorization form, in his or her
name jointly with a member of his or her family, with right of survivorship.
10. EFFECTIVE DATE OF AMENDMENT AND RESTATEMENT OF THE DURATION OF THE PLAN.
The amendment and restatement of the Plan as set forth herein shall be
effective as of April 1, 2000, subject to the approval of such amendment and
restatement by the shareholders of the Company. The Plan, as so amended and
restated (and as it may hereafter be amended), shall remain in effect until all
shares authorized to be issued or transferred hereunder have been exhausted or
until this Plan is sooner terminated by the Board of Directors, and may continue
in effect thereafter with respect to any options outstanding at the time of such
termination if the Board of Directors so provides.
11. AMENDMENT AND TERMINATION OF THE PLAN.
The Plan may at any time be amended in any respect or terminated by written
resolution of the Board of Directors without shareholder approval, unless
shareholder approval is required under Section 423 of the Code.
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12. GENERAL PROVISIONS.
(a) Nothing contained in this Plan shall be deemed to confer upon any
person any right to continue as an employee of or to be associated in any
other way with the Company for any period of time or at any particular rate
of compensation.
(b) No person shall have any rights as a stockholder of the Company with
respect to any shares optioned under this Plan until such shares are issued
or transferred to him or her.
(c) All expenses of adopting and administering this Plan shall be borne
by the Company, and none of such expenses shall be charged to any
participant.
(d) The Plan shall be governed by and construed under the laws of the
State of Delaware, without giving effect to the principles of conflicts of
laws of that State.
(e) The Plan and each offering under this Plan are intended to qualify
as an "employee stock purchase plan" within the meaning of Code
Section 423. Every provision of this Plan shall be administered, interpreted
and construed to carry out those intentions, and any provision that cannot
be so administered, interpreted and construed shall to that extent be
disregarded.
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN Please mark /X/
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED your votes as
STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL indicated in
BE VOTED FOR ITEMS 1 AND 2. this example
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR.)
Item 1. ELECTION OF DIRECTORS.
FOR all nominees Nominees: Howard A. Cristensen, John B.
listed to the right Dicus, Maria de Lourdes Duke, Ben M. Enis,
(except as marked Donald A. Johnston, John H. Robinson, Jr.,
to the contrary) James Q. Wilson, Annette M. Beck, Anthony D.
Somma, Carl M. Koupal, Jr. and Douglas T.
/ / Lake.
WITHHOLD If any nominee is unable or unwilling to
AUTHORITY serve or is otherwise unavailable, said
to vote for all proxies shall have discretion and authority
nominees listed to to vote in accordance with their judgment
the right for any other nominees. (INSTRUCTION: To
withhold authority to vote for one or more
/ / individual nominees, write such name or
names in the space provided below.)
--------------------------------------------
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR.)
Item 2. APPROVAL OF AMENDMENT AND RESTATEMENT OF THE COMPANY'S EMPLOYEE STOCK
PURCHASE PLAN.
FOR AGAINST ABSTAIN
/ / / / / /
Date
----------------------------------------
Signature
-----------------------------------
Signature
-----------------------------------
NOTE: Please sign exactly as name appears to
the left. When signing as attorney,
executor, trustee, guarantor or officer of a
corporation, please give full title as such.
For joint accounts, all named holders should
sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
- - - --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
PROTECTION ONE, INC.
6011 BRISTOL PARKWAY
CULVER CITY, CALIFORNIA 90230
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR
THE ANNUAL MEETING OF SHAREHOLDERS ON MAY 23, 2000
The undersigned, a stockholder of Protection One, Inc., a California
corporation, hereby appoints ANNETTE M. BECK, DOUGLAS T. LAKE and ANTHONY D.
SOMMA, and each of them as the attorneys and proxies of the undersigned, with
power of substitution, to attend the Annual Meeting of Shareholders of
Protection One, Inc. to be held at the Ritz Carlton Marina del Rey at 4375
Admiralty Way, Marina del Rey, California 90292 on Tuesday, May 23, 2000, at
10:00 A.M. Pacific Daylight Time, and at any adjournments or postponements
thereof, and to vote the number of shares the undersigned would be entitled to
vote if personally present as designated on the reverse side, and, in their
discretion, upon such other matters as may properly come before the meeting.
This proxy revokes all prior proxies given by the undersigned.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. UNLESS OTHERWISE
MARKED, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2.
RECEIPT OF THE NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT IS
HEREBY ACKNOWLEDGED.
(Continued, and to be marked, dated and signed on the other side)
- - - --------------------------------------------------------------------------------
FOLD AND DETACH HERE
