UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 8)
Protection One, Inc.
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(Name of Issuer)
Common Stock, par value $.01 per share
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(Title of Class of Securities)
74 3663 304
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(CUSIP Number)
Lee P. Wages
President
Westar Capital, Inc.
818 S. Kansas Avenue
Topeka, Kansas 66612
(785) 575-8020
copy to:
Richard D. Terrill
818 S. Kansas Avenue
Topeka, Kansas 66612
(785) 575-6322
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
February 29, 2000
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(Date of Event which Requires Filing of this Statement)
If a filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
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CUSIP NO. 74 3663 304 PAGE 2 OF 7 PAGES
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Westar Capital, Inc. 48-1092416
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(A) [ ]
(B) [X]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
NA
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d)OR 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Kansas
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7. SOLE VOTING POWER
NUMBER OF 0
SHARES ----------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 107,328,902
EACH ----------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 0
WITH ----------------------------------------
10. SHARED DISPOSITIVE POWER
107,328,902
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
107,328,902
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
[ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
84.55%
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14. TYPE OF REPORTING PERSON
CO
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CUSIP NO. 74 3663 304 PAGE 3 OF 7 PAGES
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Western Resources, Inc.
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(A) [ ]
(B) [X]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
NA
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d)OR 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Kansas
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7. SOLE VOTING POWER
NUMBER OF 0
SHARES ----------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 107,328,902
EACH ----------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 0
WITH ----------------------------------------
10. SHARED DISPOSITIVE POWER
107,328,902
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
107,328,902
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
[ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
84.55%
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14. TYPE OF REPORTING PERSON
CO
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CUSIP NO. 74 3663 304 PAGE 4 OF 7 PAGES
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Pursuant to Rule 13d-2(a) of Regulation 13D-G of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, Western
Resources, Inc., a Kansas corporation ("Western Resources") and Westar Capital,
Inc., a Kansas corporation ("Westar", and together with Western Resources, the
"Reporting Persons"), hereby amend and supplement their Statement on Schedule
13D originally filed by the Reporting Persons on November 24, 1997, as amended
by Amendments No. 1-7 thereto, (the "Statement"), with respect to the Voting
Common Stock, par value $.01 per share (the "Shares") of Protection One, Inc.
(the "Issuer"). Unless otherwise indicated, each capitalized term used but not
defined herein shall have the meaning assigned to such term in the Statement.
Item 1. Security and Issuer
No material change.
Item 2. Identity and Background
No material change.
Item 3. Source and Amount of Funds or Other Consideration
No material change.
Item 4. Purpose of Transaction
On March 1, 2000, Western Resources and the Issuer issued a joint press
release (the "Joint Press Release") announcing that Westar has purchased the
continental European and United Kingdom operations (collectively, the "European
Operations") and certain other assets of the Issuer.
Pursuant to the terms of the Agreement, dated as of February 29, 2000
(the "Purchase Agreement"), by and among the Issuer, Protection One Alarm
Monitoring, Inc., a Delaware corporation and a wholly owned direct subsidiary of
the Issuer ("Monitoring"), and Westar, Westar purchased and acquired all of the
issued and outstanding stock of Protection One (UK) plc ("P1 UK"), a corporation
formed under the laws of the United Kingdom (formerly Hambro Countrywide
Security plc) and a wholly owned subsidiary of Monitoring (the "P1 UK Stock");
all of the issued and outstanding capital stock of Protection One International
Inc. ("P1 International"), a Delaware corporation and a wholly owned subsidiary
of Monitoring (the "P1 International Stock"); and all of the issued and
outstanding capital stock of Protection One Investments, Inc.
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CUSIP NO. 74 3663 304 PAGE 5 OF 7 PAGES
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("P1 Investments"), a Delaware corporation and a wholly owned subsidiary of the
Issuer (the "P1 Investments Stock").
The purchase price paid by Westar under the Purchase Agreement was $244
million, and was comprised of cash consideration of approximately $183 million
and the transfer to the Issuer by Westar of certain of Monitoring's debt
securities with a market value of approximately $61 million (including 6 3/4%
Convertible Senior Subordinated Notes due 2003 convertible into 4,426,232
Shares, having a principal value of $39,775,522 and for purposes of the
transaction a market value of $21,081,027. Cash proceeds to the Issuer were used
to reduce the outstanding balance owed to Westar under the Credit Agreement (as
defined below). The Purchase Agreement includes, among other things, a provision
under which Westar is obligated to pay to the Issuer a portion of the net gain,
if any, on a subsequent sale of the businesses on a declining basis over the
four years following the date of the Purchase Agreement.
In connection with the Purchase Agreement, the Issuer and Western
Resources entered into Amendment No.2, dated as of February 29, 2000 (the
"Contribution Amendment"), to the Contribution Agreement, dated as of July 30,
1997, as amended by Amendment No.1 thereto, dated October 2, 1997 (the
"Contribution Agreement"). Pursuant to the Contribution Amendment, Section
3.15(a) of the Contribution Agreement was amended to permit Western Resources or
any of its subsidiaries to acquire and own the P1 UK Stock, the P1 International
Stock, the P1 Investments Stock and certain other investments and to exercise
and enjoy all rights incident to the ownership of such securities, subject to
certain restrictions.
Westar and Monitoring also entered into the Second Amendment, dated as
of February 29, 2000 (the "Credit Amendment"), to the Credit Agreement, dated as
of December 21, 1998 (as renewed, extended, modified and amended from time to
time, the "Credit Agreement"). The Credit Amendment reduced the commitment under
the Credit Agreement from $250 million to $115 million and changed the maturity
date to January 2, 2001. The Credit Amendment also provided that the commitment
available under the Credit Agreement may be increased by up to $40 million to
finance certain acquisitions by the Issuer. As of the date of this filing,
approximately $60 million is drawn under the Credit Agreement.
The Purchase Agreement, the Contribution Amendment and the Credit
Amendment were negotiated by a special committee of the Board of Directors of
the Issuer and approved by the independent members of the Board of Directors of
the Issuer. The Contribution Amendment was also approved by the continuing
directors of the Issuer.
Item 5. Interest in Securities of the Issuer
(a) To the best knowledge and belief of the Reporting Persons, there
were 126,944,077 Shares issued and outstanding as of November 10, 1999. The
Reporting Persons beneficially own (withing the meaning of Rule 13d-3)
107,328,902 Shares, constituting approximately 84.55% of the total amount of
issued and outstanding Shares.
(b) No material change.
(c) The response to Item 4 set forth above is incorporated by reference
in its entirety to this Item 5.
(d) N/A
(e) N/A
Item 6. Contracts, Arrangements,
Understandings or Relationships
with Respect to Securities of
the Issuer
The response to Item 4 set forth above and the Joint Press Release and
the agreements attached hereto as Exhibit 1-4 are incorporated by reference in
their entirety to this Item 6.
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CUSIP NO. 74 3663 304 PAGE 6 OF 7 PAGES
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Item 7. Material to Be Filed as Exhibits
Exhibit 1. Joint Press Release of Western Resources, Inc. and
Protection One, Inc., dated March 1, 2000.
Exhibit 2. Purchase Agreement, dated as of February 29, 2000, by and
among the Issuer, Monitoring and Westar.
Exhibit 3. Amendment No.2 to Contribution Agreement, dated as of
February 29, 2000, between the Issuer and Western.
Exhibit 4. Second Amendment to Credit Agreement, dated as of February
29, 2000, by and among Westar, Monitoring and Westar, as Administrative Agent.
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CUSIP NO. 74 3663 304 PAGE 7 OF 7 PAGES
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SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: March 7, 2000
WESTAR CAPITAL, INC.
By: /s/Lee P. Wages
Name: Lee P. Wages
Title: President
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: March 7, 2000
WESTERN RESOURCES, INC.
By: /s/ Richard D. Terrill
Name: Richard D. Terrill
Title: Executive Vice
President and
General Counsel
WEDNESDAY MARCH 1, 9:06 AM EASTERN TIME
COMPANY PRESS RELEASE
PROTECTION ONE ANNOUNCES SALE OF
EUROPEAN OPERATIONS, AMENDMENT TO CREDIT FACILITY
TOPEKA, Kan. and CULVER CITY, Calif.--(BUSINESS WIRE)--March 1, 2000--Protection
One (NYSE:POI - news) and Westar Capital, an unregulated subsidiary of Western
Resources (NYSE:WR - news), announced today that Westar Capital has purchased
the Continental European (CET) and United Kingdom operations, collectively the
"European operations," and certain other assets of Protection One for $244
million.
Under the agreement, Westar Capital paid approximately $183 million in cash and
transferred to Protection One debt securities with a market value of
approximately $61 million. Cash proceeds from the transaction were used to
reduce the outstanding balance owed to Westar Capital on Protection One's
revolving credit facility.
In addition, the companies finalized an amendment to the credit facility for
Protection One which reduced the facility to $115 million, down from the
original amount of $250 million, with a maturity date of January 2, 2001. For
approved acquisitions, an additional $40 million could be made available under
the facility. As a result of the transaction, Protection One has approximately
$60 million currently drawn under the facility. As of the closing, Western
Resources and its subsidiaries own no Protection One debt securities outside of
the credit facility.
Under the agreement, Westar Capital purchased the European operations, as well
as other miscellaneous Protection One investments. The purchase of the European
operations includes a provision under which Westar Capital is obligated to pay
to Protection One a portion of net gain, if any, on a subsequent sale of the
businesses on a declining basis over the four years following the agreement.
The assets purchased have a book value of approximately $230 million and EBITDA
for the nine-months ended September 30, 1999 of approximately $36 million. The
acquisition by Westar Capital included certain debt obligations of the European
operations in the amount of approximately $60 million as of the closing date.
The transaction and the amendment to the credit facility were negotiated by a
special committee of the Protection One board and approved by the independent
members of the Protection One board. Warburg Dillon Read, LLC acted as an
advisor in delivering a fairness opinion to the special committee with regard to
the sale of the European operations.
<PAGE>
Western Resources (NYSE:WR - news) is a consumer services company with interests
in monitored services and energy. The company has total assets of more than $8
billion, including security company holdings through ownership of Protection One
(NYSE:POI - news), which has approximately 1.6 million security customers in
North America and Europe. Its utilities, KPL and KGE, provide electric service
to approximately 614,000 customers in Kansas. Through its ownership in ONEOK
Inc. (NYSE:OKE - news), a Tulsa-based natural gas company, Western Resources has
a 45 percent interest in the eighth largest natural gas distribution company in
the nation, serving more than 1.4 million customers. For more information about
Western Resources and its operating companies, visit us on the Internet at
http://www.wr.com.
Protection One, one of the leading residential security alarm companies in the
United States, provides monitoring and related security services to
approximately 1.6 million residential and commercial subscribers in North
America and Europe.
Forward-Looking Statements: Certain matters discussed in this news release are
"forward-looking statements." The Private Securities Litigation Reform Act of
1995 has established that these statements qualify for safe harbors from
liability. Forward-looking statements may include words like we "believe",
"anticipate," "expect" or words of similar meaning. Forward-looking statements
describe our future plans, objectives, expectations, or goals. Such statements
address future events and conditions concerning the consummation of the possible
asset sale and credit facility described in this press release, capital
expenditures, earnings, litigation, rate and other regulatory matters, the
outcome of accounting issues being reviewed by the SEC staff, possible corporate
restructurings, mergers, acquisitions, dispositions, liquidity and capital
resources, interest and dividend rates, year 2000 issue, environmental matters,
changing weather, nuclear operations, ability to enter new markets successfully
and capitalize on growth opportunities in nonregulated businesses, events in
foreign markets in which investments have been made, and accounting matters. Our
actual results may differ materially from those discussed here. See the
company's and Protection One's 1998 Annual Report on Form 10-K and 10K/A,
quarterly reports on Forms 10-Q and current reports on Form 8K for further
discussion of factors affecting the company's and Protection One's performance.
Western Resources disclaims any obligation to update any forward-looking
statements as a result of developments occurring after the date of this news
release. Other risks and uncertainties are described in Protection One's 1998
Form 10-K/A filed with the Securities and Exchange Commission on Dec. 27, 1999,
and quarterly reports on Form 10-Q filed on May 17, 1999, August 16, 1999 and
November 12, 1999. Protection One disclaims any obligation to update any
forward-looking statements as a result of developments occurring after the date
of this press release.
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Contact:
Western Resources
Michel' Philipp, 785/575-1927 (Media)
fax - 785/575-6399
or
Jim Martin, 785/575-6549 (Investors)
fax - 785/575-8160
or
Protection One
Robin Lampe, 785.575.6468 (Media)
fax - 785.575.6511
[email protected]
or
Craig Weingartner, 785/575-8178 (Investors)
fax - 785/575-6511
AGREEMENT
THIS AGREEMENT (the "AGREEMENT"), dated as of February 29, 2000, by and
among, Protection One, Inc., a Delaware corporation ("PROTECTION ONE"),
Protection One Alarm Monitoring, Inc., a Delaware corporation and wholly owned
direct subsidiary of Protection One ("MONITORING", and collectively with
Protection One, the "SELLERS" and each a "SELLER"), and Westar Capital, Inc., a
Kansas corporation (the "PURCHASER").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Monitoring is the record and beneficial owner of all of the
issued and outstanding shares of capital stock of Protection One (UK) plc, a
corporation formed under the laws of the United Kingdom (formerly Hambro
Countrywide Security plc, "P1 UK" and such stock, the "P1 UK STOCK"); Monitoring
is the record and beneficial owner of all of the issued and outstanding capital
stock of Protection One International, Inc., a Delaware corporation ("P1
INTERNATIONAL" and such stock, the "P1 INTERNATIONAL STOCK"); Protection One is
the record and beneficial owner of all of the issued and outstanding shares of
capital stock of Protection One Investments, Inc., a Delaware corporation ("P1
INVESTMENTS" and such stock, the "P1 INVESTMENTS STOCK"); and P1 Investments is
the owner of a portfolio of marketable securities (the "PORTFOLIO") listed on
Schedule A hereto and certain Series C 7% Redeemable Cumulative Preferred Stock
and Series D 6% Convertible Cumulative Preferred Stock of Guardian
International, Inc. listed on Schedule B hereto (the "GUARDIAN STOCK");
WHEREAS, the Purchaser desires to purchase, and Sellers desire to sell,
all of the P1 UK Stock, the P1 International Stock and the P1 Investments Stock,
subject to the terms and conditions of this Agreement;
WHEREAS, the Purchaser desires to transfer, and Protection One desires
to accept, certain outstanding debt securities of Monitoring in part payment of
the securities transferred hereunder, subject to the terms and conditions of
this Agreement;
WHEREAS, Monitoring and the Purchaser desire to enter into an amendment
(the "CREDIT AGREEMENT AMENDMENT") in the form attached hereto as Exhibit I to
that certain Credit Agreement, dated as of December 21, 1998, among Monitoring,
as borrower, NationsBank, N.A. (now known as Bank of America, N.A.), as
Administrative Agent, the Syndication Agent, the Documentation Agent and the
Lenders (as each is defined therein) (as amended, modified and revised from time
to time, the "CREDIT AGREEMENT"), such Lenders' and such Administrative Agent's
interests thereunder having been assigned to and assumed by the Purchaser
pursuant to that certain Assignment and Acceptance dated as of December 17,
1999, executed by Monitoring, the Lenders defined therein, and the Purchaser, as
assignee and successor Administrative Agent; and
<PAGE>
WHEREAS, Western Resources, Inc., a Kansas corporation and the parent
of the Purchaser ("WESTERN RESOURCES"), the Purchaser and Protection One desire
to enter into an amendment (the "CONTRIBUTION AGREEMENT AMENDMENT") in the form
attached hereto as Exhibit II to that certain Contribution Agreement, dated as
of July 30, 1997, as amended on October 2, 1997, between Western Resources and
Protection One (as amended, modified and revised from time to time, the
"CONTRIBUTION AGREEMENT");
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, and
upon the terms and subject to the conditions hereinafter set forth, the
Purchaser and the Sellers hereby agree as follows:
ARTICLE I - PURCHASE AND SALE OF STOCK
1.1 Acquisition and Transfer of Stock and Other Assets. Upon the terms and
subject to the conditions hereinafter set forth, each Seller hereby sells,
assigns, transfers, conveys and delivers to the Purchaser, and the Purchaser
hereby purchases, acquires and accepts from each Seller, all of such Seller's
right, title and interest in and to the P1 UK Stock, the P1 International Stock
and the P1 Investments Stock.
ARTICLE II - PURCHASE PRICE; VALUATION OF DEBT CONSIDERATION
2.1 Purchase Price and Payment. The aggregate purchase price to be paid by
the Purchaser to the Sellers for the P1 UK Stock, the P1 International Stock and
the P1 Investments Stock is Two hundred forty-four million dollars
($244,000,000) (the "PURCHASE PRICE"), comprised of cash consideration in the
amount of One hundred eighty-three million twenty-five thousand dollars
($183,025,000) (the "CASH CONSIDERATION") and the balance in the 13-5/8% Senior
Subordinated Discount Notes due 2005, the 6-3/4% Convertible Senior Subordinated
Notes due 2003 and the 8-1/8% Senior Subordinated Notes due 2009 of Monitoring
owned by the Purchaser (the "DEBT CONSIDERATION") in the principal amounts and
market values (determined pursuant to Section 2.3 hereof) set forth on Schedule
C.
2.2 Allocation of Purchase Price. The Purchaser and Protection One on
behalf of the Sellers hereby agree that the Purchase Price of the P1 UK Stock,
the P1 International Stock and the P1 Investments Stock will be allocated as set
forth on Schedule D hereto. Subject to the requirements of any applicable tax
law, all tax returns and reports filed by the Purchaser and the Sellers shall be
prepared consistently with such allocation.
2.3 Valuation of Debt Consideration. The Debt Consideration deliverable by
the Purchaser to Protection One on behalf of the Sellers hereunder has been
valued as follows: each class of Debt Consideration has been valued as the
average of the daily average of the closing bid price and the asked price quoted
for each day, rounded to the
<PAGE>
nearest cent, over the ten (10) trading days ending on and including the trading
day immediately preceding the date of calculation, February 29, 2000. Protection
One attempted to obtain closing bid and asked prices from Donaldson, Lufkin &
Jenrette Securities Corporation, Chase Securities, Inc. and Bear, Stearns & Co.
Inc. Inasmuch as Donaldson, Lufkin & Jenrette Securities Corporation was the
only one of the three that was actively making a market in the Monitoring debt,
the calculation of the value of the Debt Consideration was based solely upon the
quotes provided by Donaldson, Lufkin & Jenrette Securities Corporation.
ARTICLE III - THE CLOSING
3.1 Closing Date. The closing (the "CLOSING") shall take place at the
offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York at a
time specified by the parties, on the date hereof or such other place or time or
on such other date as Protection One on behalf of the Sellers and the Purchaser
may agree. The date of the Closing is referred to in this Agreement as the
"CLOSING DATE."
3.2 Deliveries by Sellers to the Purchaser. At the Closing (or in the case
of clause (e) below, as soon as practicable following the Closing) and on the
terms and subject to the conditions hereof, the Sellers, as applicable, shall
deliver, against receipt of the consideration set forth in 2.1 hereof, to the
Purchaser or, where applicable, to the securities account designated by the
Purchaser:
(a) certificates or book-entry transfer of the shares of the P1 UK
Stock, the P1 International Stock and the P1 Investments Stock, which in the
case of certificates shall be duly endorsed in blank or accompanied by stock
powers duly executed;
(b) the Contribution Agreement Amendment, executed by a duly authorized
officer of Protection One and accompanied by evidence reasonably satisfactory to
the Purchaser of its authorization and approval by the Continuing Directors (as
defined in the Contribution Agreement) of Protection One;
(c) the Credit Agreement Amendment, executed by a duly authorized
officer of Monitoring;
(d) the opinions of Weil, Gotshal & Manges LLP in the forms attached
hereto as Exhibit III; and
(e) written resignation letters from such directors and officers of P1
UK, P1 International, P1 Investments and their respective subsidiaries as the
Purchaser shall request prior to the Closing Date.
<PAGE>
3.3 Deliveries by the Purchaser to the Sellers. At the Closing, the
Purchaser shall deliver or cause to be delivered to the Sellers or, where
applicable, to the securities account designated by Protection One on behalf of
the Sellers, the following:
(a) immediately available funds in the amount of the Cash
Consideration;
(b) certificates or book-entry transfer of the securities constituting
Debt Consideration hereunder, which in the case of certificates shall be duly
endorsed in blank or accompanied by the appropriate assignment or transfer
agreement duly executed;
(c) the Contribution Agreement Amendment, executed by a duly authorized
officer of Western Resources;
(d) the Credit Agreement Amendment, executed by a duly authorized
officer of the Purchaser; and
(e) the opinion of Richard Terrill, General Counsel of Western
Resources, in the form attached hereto as Exhibit IV.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby represent and warrant as of the date hereof and
the Closing Date to the Purchaser as follows:
4.1 Organization and Good Standing.
(a) Each of Protection One and Monitoring is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Each Seller has all requisite corporate power and
authority to carry on its business as it is now being conducted, and to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby.
(b) Each of P1 UK, P1 International, P1 Investments and their
respective subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each of P1 UK, P1
International, P1 Investments and their respective subsidiaries is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, with such
exceptions as are not reasonably likely, individually or in the aggregate, to
have a material adverse effect on the business, assets, condition (financial or
other) or results of operations on P1 UK, P1 International, P1 Investments and
their respective subsidiaries, taken as a whole. Sellers have delivered to the
Purchaser accurate and complete copies of the certificate or
<PAGE>
articles of incorporation or organization and bylaws (or other applicable
charter documents), as currently in effect, of each of P1 UK, P1 International,
P1 Investments and their respective subsidiaries.
4.2 Authorization of Agreement. Each Seller has full corporate power and
authority to execute and deliver this Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement or to be
executed by any Seller in connection with the consummation of the transactions
contemplated by this Agreement (all such other agreements, documents,
instruments and certificates required to be executed by such Seller being
hereinafter referred to, collectively, as the "SELLER DOCUMENTS"), and to
perform fully its obligations hereunder and thereunder. The execution, delivery
and performance by the Sellers of this Agreement and each of the Seller
Documents, as applicable, have been duly authorized by all necessary corporate
action on the part of the Sellers. This Agreement and the Seller Documents have
been duly executed and delivered by each Seller, as applicable, and (assuming
the due authorization, execution and delivery by the other parties hereto and
thereto) this Agreement and the Seller Documents constitute the legal, valid and
binding obligations of such Sellers, enforceable against each Seller in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
4.3 Capitalization; Ownership and Transfer of Stock.
(a) The authorized capital stock of P1 UK consists of 7,040,000
ordinary shares of (pound)1 per share. As of the date hereof, there are issued
and outstanding 4,490,611 ordinary shares of (pound)1 per share, all issued in
the name of Monitoring.
(b) The authorized capital stock of P1 International consists of 1,000
shares of common stock, par value $0.10 per share. As of the date hereof, there
are issued and outstanding 1,000 shares of common stock, all issued in the name
of Monitoring.
(c) The authorized capital stock of P1 Investments consists of 1,000
shares of common stock, par value $0.10 per share. As of the date hereof, there
are issued and outstanding 1,000 shares of common stock, all issued in the name
of Protection One.
(d) Except as set forth on Section 4.3(d) of the Disclosure Schedule,
there is no existing option, warrant, call, right, commitment or other agreement
of any character to which any of the Sellers, P1 UK, P1 International, P1
Investments or any of the subsidiaries of P1 UK, P1 International or P1
Investments is a party requiring, and there are no securities of P1 UK, P1
International, P1 Investments or any of the subsidiaries of P1 UK, P1
International or P1 Investments outstanding which upon conversion or exchange
would require, the issuance, sale or transfer of any additional
<PAGE>
shares of capital stock or other equity securities of P1 UK, P1 International,
P1 Investments or any of the subsidiaries of P1 UK, P1 International or P1
Investments or other securities convertible into, exchangeable for or evidencing
the right to subscribe for or purchase shares of capital stock or other equity
securities of P1 UK, P1 International, P1 Investments or any of the subsidiaries
of P1 UK, P1 International or P1 Investments. None of the Sellers, P1 UK, P1
International, P1 Investments or any of the subsidiaries of P1 UK, P1
International or P1 Investments is a party to any voting trust or other voting
agreement with respect to any of the shares of the P1 UK Stock, P1 International
Stock, P1 Investments Stock or capital stock of any of the subsidiaries of P1
UK, P1 International or P1 Investments or to any agreement relating to the
issuance, sale, redemption, transfer or other disposition of the capital stock
of P1 UK, P1 International, P1 Investments or any of the subsidiaries of P1 UK,
P1 International or P1 Investments.
(e) Protection One is the record and beneficial owner of, and has good
and valid title to, the P1 Investments Stock free and clear of any Liens (as
defined below). Monitoring is the record and beneficial owner of, and has good
and valid title to, the P1 UK Stock and the P1 International Stock, free and
clear of any Liens. P1 Investments is the record and beneficial owner of, and
has good and valid title to the Portfolio, free and clear of any Liens. P1
Investments is the beneficial owner of, and has good and valid title to the
Guardian Stock, free and clear of any Liens. At the Closing, each Seller, as
applicable, will transfer to the Purchaser good and marketable title to the P1
UK Stock, the P1 Investments Stock and the P1 International Stock, free and
clear of any Liens. Except as set forth on Section 4.3(e) of the Disclosure
Schedule, each of P1 UK, P1 International and P1 Investments is directly or
indirectly the record and beneficial owner of, and has good and valid title to,
all of the outstanding shares of capital stock of each of its subsidiaries, free
and clear of any Liens. The only direct or indirect subsidiaries of P1 UK, P1
International or P1 Investments are those listed in Section 4.3(e) of the
Disclosure Schedule. Except as set forth in Section 4.3(e) of the Disclosure
Schedule, neither P1 UK, P1 International or P1 Investments owns directly or
indirectly any interest in any corporation, partnership, joint venture or other
business association or entity.
4.4 No Conflicts. Except as set forth on Section 4.4 of the Disclosure
Schedule, neither the execution and delivery by the Sellers of this Agreement
and the Seller Documents, the consummation of the transactions contemplated
hereby or thereby, nor compliance by the Sellers with any of the provisions
hereof or thereof will (i) conflict with, or result in the breach of, any
provision of the certificate of incorporation or by-laws or comparable
organizational documents of any Seller, P1 UK, P1 International, P1 Investments
or any of the subsidiaries of P1 UK, P1 International or P1 Investments; (ii)
conflict with, violate, result in the breach of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or suspension of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which either any Seller, P1 UK, P1 International, P1
Investments or any of the subsidiaries of P1 UK, P1 International or
<PAGE>
P1 Investments is a party or by which it or any of their respective properties
or assets are bound; (iii) result in the creation of any mortgages, claims,
liens, security interests, options pledges or encumbrances ("LIENS") upon the
properties or assets of any Seller, P1 UK, P1 International, P1 Investments or
any of the subsidiaries of P1 UK, P1 International or P1 Investments; or (iv)
violate any material judgment, ruling, order, writ, injunction or decree
applicable to any Seller, P1 UK, P1 International, P1 Investments or any of the
subsidiaries of P1 UK, P1 International or P1 Investments or any of their
respective properties or assets.
4.5 Financial Statements; Undisclosed Liabilities.
(a) Sellers have provided to the Purchaser true and complete copies of
the unaudited income statement, balance sheet and statement of changes in cash
flows as of September 30, 1999 for P1 UK (collectively, the "P1 UK FINANCIAL
STATEMENTS"), and for Compagnie Europeenne de Telesecurite and its subsidiaries
(collectively, the "CET FINANCIAL STATEMENTS"). Except as set forth on Section
4.5(a) of the Disclosure Schedule, the P1 UK Financial Statements and the CET
Financial Statements fairly present, in all material respects, the consolidated
financial position of P1 UK and its subsidiaries and CET and its subsidiaries,
respectively, as of the dates thereof, and the consolidated results of
operations of P1 UK and its subsidiaries and CET and its subsidiaries,
respectively, for the applicable periods then ended, and have been prepared
(except for the associated notes thereto) in accordance with the generally
accepted accounting principles of the United States, applied on a consistent
basis.
(b) To the knowledge of the executive officers of Protection One,
neither P1 UK or any of its subsidiaries nor CET or any of its subsidiaries nor
P1 Investments or any of its subsidiaries has any liabilities or obligations of
any nature, whether absolute, accrued, unmatured, contingent or otherwise,
except (i) the liabilities recorded on the P1 UK Financial Statements and the
CET Financial Statements, (ii) liabilities or obligations incurred in the
ordinary course of business and consistent with past practice since September
30, 1999 and (iii) liabilities and obligations other than liabilities and
obligations contemplated by clauses (i) or (ii) above not exceeding $1 million
in the aggregate.
4.6 Absence or Change of Events. Since September 30, 1999:
(a) There has not been any direct or indirect redemption, purchase or
other acquisition of any shares of capital stock of P1 UK, P1 International, P1
Investments or any of their respective subsidiaries, or any declaration, setting
aside or payment of any dividend or other distribution by P1 UK, P1
International, P1 Investments or any of their respective subsidiaries in respect
of their respective capital stock;
(b) Except as set forth on Section 4.6(b) of the Disclosure Schedule,
there has not been any changes in the financial or accounting methods,
principles or
<PAGE>
practices of or applicable to P1 UK, P1 International, P1 Investments or any of
their respective subsidiaries; and
(c) Except as set forth in Section 4.6(c) of the Disclosure Schedule,
except in the ordinary course of business consistent with past practice
involving amounts which are not material, there has not been any revaluation by
P1 UK, P1 International, P1 Investments or any of their respective subsidiaries
of any of their respective assets, including, without limitation, writing down
the value of inventory, customer accounts or accounts receivable.
4.7 Permits. P1 UK, P1 International, P1 Investments and their respective
subsidiaries will have immediately following consummation of the transactions
contemplated by this Agreement and the Seller Documents all of the material
permits, licenses and franchises from governmental entities which they have as
of the date of this Agreement.
4.8 Intellectual Property. P1 UK, P1 International, P1 Investments and
their respective subsidiaries will license or own, directly or indirectly,
immediately following consummation of the transactions contemplated by this
Agreement and the Seller Documents all of the material trademarks (whether or
not registered) and trademark registrations and applications, patent and patent
applications, copyrights and copyright applications, service marks, service mark
registrations and applications, trade dress, trade and product names, computer
software and source codes and other intellectual property which they license or
own, directly or indirectly, as of the date of this Agreement.
4.9 Sufficiency of Assets. P1 UK, P1 International, P1 Investments and
their respective subsidiaries immediately following consummation of the
transactions contemplated by this Agreement and the Seller Documents will
license, lease or own or otherwise will have valid rights to use all of the
material assets which they license, lease or own or otherwise have valid rights
to use as of the date of this Agreement. Sellers and their subsidiaries (other
than P1 UK, P1 International and P1 Investments and their subsidiaries) do not
provide any material services to P1 UK, P1 International and P1 Investments and
their subsidiaries.
4.10 Employee Benefits. To the knowledge of the executive officers of
Protection One, the execution and delivery of this Agreement and the Seller
Documents and the consummation of the transactions contemplated hereby and
thereby will not either alone or in connection with any employee's termination
of employment or other event result in an increase in the amount of, or
accelerate the vesting or timing of payments of, any salary, bonus, pension or
welfare benefits, severance or other compensation or benefits payable to or in
respect of any employee of P1 UK, P1 International or P1 Investments or any of
their respective subsidiaries.
4.11 Finders or Brokers. Except as set forth in Section 4.11 of the
Disclosure Schedule, none of the Sellers, P1 UK, P1 International, P1
Investments or any of their respective subsidiaries, or the Board of Directors
or any committee thereof of any Seller,
<PAGE>
P1 UK, P1 International, P1 Investments or any of their respective subsidiaries
has employed any investment banker, broker, finder or intermediary in connection
with the transactions contemplated by this Agreement or the Seller Documents who
might be entitled to a fee or any commission in connection with such
transactions, and Section 4.11 of the Disclosure Schedule sets forth the maximum
consideration (present and future) agreed to be paid to each such party.
4.12 Opinion of Financial Advisor. The Special Committee of the Board of
Directors of Protection One has received the opinion of Warburg Dillon Read LLC,
dated the date of this Agreement, to the effect that, as of such date, and
subject to the assumptions and qualifications set forth therein, the
consideration to be received for P1 UK and P1 International is fair, from a
financial point of view, to Protection One.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants as of the date hereof to
the Sellers as follows:
5.1 Organization and Good Standing. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Kansas, and has all requisite corporate power and authority to carry on its
business as it is now being conducted, and to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby.
5.2 Authorization of Agreement. The Purchaser has full corporate power and
authority to execute and deliver this Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement or to be
executed by the Purchaser in connection with the consummation of the
transactions contemplated by this Agreement (all such other agreements,
documents, instruments and certificates required to be executed by the Purchaser
being hereinafter referred to, collectively, as the "PURCHASER DOCUMENTS") and
to perform fully its obligations hereunder and thereunder. The execution,
delivery and performance by the Purchaser of this Agreement and each Purchaser
Document have been duly authorized by all necessary action on the part of the
Purchaser. This Agreement and the Purchaser Documents have been duly executed
and delivered by the Purchaser and (assuming the due authorization, execution
and delivery by the other parties hereto and thereto) this Agreement and the
Purchaser Documents constitute the legal, valid and binding obligations of the
Purchaser, enforceable against the Purchaser in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
5.3 Ownership and Transfer of Debt Consideration. The Purchaser is the
record and beneficial owner of, and has good and valid title to, all Debt
Consideration set forth in Schedule C, free and clear of any and all Liens. At
the Closing, the Purchaser
<PAGE>
will transfer to Protection One good and marketable title to all such Debt
Consideration, free and clear of all Liens.
5.4 No Conflicts. Except as set forth on Section 5.4 of the Disclosure
Schedule, neither the execution and delivery by the Purchaser of this Agreement
and the Purchaser Documents, the consummation of the transactions contemplated
hereby or thereby, nor compliance by the Purchaser with any of the provisions
hereof or thereof will (i) conflict with, or result in the breach of, any
provision of the certificate of incorporation or by-laws or comparable
organizational documents of the Purchaser; (ii) conflict with, violate, result
in the breach of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination or suspension of, or accelerate the performance required by, or
result in a right of termination or acceleration under, any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which the Purchaser is a party or by which it or any of its properties or assets
are bound; (iii) result in the creation of any Liens upon the properties or
assets of the Purchaser; or (iv) violate any material judgment, ruling, order,
writ, injunction or decree applicable to the Purchaser or any of its properties
or assets, except in the case of clauses (ii)-(iv) for such exceptions as are
not reasonably likely to prevent or materially delay the consummation by the
Purchaser of the transactions contemplated hereby and by the Purchaser
Documents. No filing or registration with, notification to or permit,
authorization, consent or approval of any governmental entity is required by the
Purchaser in connection with the execution and delivery by the Purchaser of this
Agreement and Purchaser Documents, the consummation of the transactions
contemplated hereby and thereby or compliance by the Purchaser with any of the
provisions hereof or thereof, except for such exceptions as are not reasonably
likely to prevent or materially delay the consummation by the Purchaser of the
transactions contemplated hereby and by the Purchaser Documents.
5.5 Securities Laws. The Purchaser is acquiring the P1 UK Stock, the P1
International Stock and the P1 Investments Stock for its own account, for
investment, and not with a view to or in connection with any distributions
thereof in contravention of the Securities Act of 1933, as amended, or any state
"blue-sky" laws.
ARTICLE VI - POST-CLOSING COVENANTS
6.1 Right of Clawback.
(a) If during the period from the Closing Date until the fourth
anniversary of the Closing Date (which anniversary date for purposes of this
Agreement shall be deemed to be February 28 of each subsequent calendar year
that is not a leap year), the Purchaser consummates a Sale to any Third Party,
the Purchaser shall pay to Protection One an amount equal to the Applicable
Percentage multiplied by the Sale Amount Difference. Such payment will be in the
same form or forms of consideration (and, in the case of two or more forms of
consideration, in the same relative amounts) as the form or forms of
consideration received by the Purchaser and its affiliates in
<PAGE>
connection with the applicable Sale. In the event that all or a portion of the
consideration required to be paid by the Purchaser to Protection One pursuant to
this Section is in the form of securities, the payment by the Purchaser to
Protection One shall include all dividends or other distributions paid with
respect to such securities by the issuer thereof between the date of the
consummation of the applicable Sale and the date of the payment by the Purchaser
to Protection One with respect to such Sale required by this Section. In the
event that all or a portion of the consideration required to be paid by the
Purchaser to Protection One pursuant to this Section is in the form of cash, the
payment by the Purchaser to Protection One shall include an interest payment
equal to the product of (i) the average of the Prime Rates in effect for each
day during the period beginning on the date of the consummation of the
applicable Sale to and including the date prior to the date of payment by the
Purchaser to Protection One with respect to such Sale, (ii) the cash amount
payable by the Purchaser to Protection One exclusive of this interest payment
and (iii) the number of days from and including the date of the consummation of
the applicable Sale to and including the date prior to the date of the payment
by the Purchaser to Protection One with respect to such Sale divided by 365. The
payment contemplated by this Section shall be made on the fifth business day
following the final determination of the Sale Amount Difference in accordance
with this Section.
The Purchaser agrees to furnish Protection One on behalf of the Sellers
written notice promptly following the consummation of any Sale or any sale,
transfer or other disposition (other than the sale, transfer or dispositions of
obsolete equipment, furniture, inventory, accounts receivables, customer
accounts and other assets in the ordinary course of business) of less than 50%
of the assets of P1 UK and its subsidiaries and P1 International and its
subsidiaries. Such notice shall specify all material terms of the transaction
(including, without limitation, the form and amounts of the consideration
received and the identity of the purchaser or transferee).
(b) For purposes of this Section:
"SALE" means (i) any direct or indirect transfer, whether by sale,
merger, consolidation or other business combination, by the Purchaser or any of
its affiliates for cash or other consideration of all or any portion of the P1
UK Stock, the P1 International Stock or the capital stock of any subsidiary of
P1 UK and P1 International beneficially owned by the Purchaser and (ii) any
sale, transfer or other disposition (other than the sale, transfer or
disposition of obsolete equipment, furniture, inventory, accounts receivable,
customer accounts and other assets in the ordinary course of business) in one or
a series of related transactions of assets of P1 UK and its subsidiaries and P1
International and its subsidiaries having an aggregate fair market value equal
to 50% or more of the aggregate fair market value of all of the assets of P1 UK
and its subsidiaries and P1 International and its subsidiaries (satisfaction of
such 50% threshold as determined by mutual agreement of the Purchaser and
Protection One, or in the absence of such agreement by an Investment Banker) of
P1 UK and its subsidiaries and P1 International and its subsidiaries for cash or
other consideration; provided, however, that "Sale" shall not include any
transfer of any of the capital stock of the Purchaser or any of its affiliates
if it is determined by the mutual agreement of the Purchaser and Protection One
(or, in the
<PAGE>
absence of such agreement, by an Investment Banker), that the aggregate fair
market of the P1 UK Stock and the P1 International Stock beneficially owned by
the Purchaser at the time of such transfer constitutes less than 75% of the
aggregate fair market value of the entity (the Purchaser or one of its
affiliates) whose capital stock or assets are being transferred (satisfaction of
such 75% threshold as determined by mutual agreement of the Purchaser and
Protection One, or in the absence of such agreement by an Investment Banker).
"INVESTMENT BANKER" means a nationally recognized investment banking
firm selected by mutual agreement of the Purchaser and Protection One (or, in
the absence of such agreement, by the mutual agreement of a nationally
recognized investment banking firm selected by the Purchaser and a nationally
recognized investment banking firm selected by Protection One). The fees and
expenses paid to any Investment Banker engaged for purposes of this Section
shall be borne equally by the Purchaser and Protection One.
"THIRD PARTY" means any person or entity other than an entity that is
directly or indirectly wholly owned by the Purchaser or that directly or
indirectly wholly owns the Purchaser.
"APPLICABLE PERCENTAGE" means 100%, with respect to a Sale consummated
on or before the first anniversary of the Closing Date; 75%, with respect to a
Sale consummated after the first anniversary of the Closing Date and on or
before the second anniversary of the Closing Date; 50%, with respect to a Sale
consummated after the second anniversary of the Closing Date and on or before
the third anniversary of the Closing Date; and 25%, with respect to a Sale
consummated after the third anniversary of the Closing Date and on or before the
fourth anniversary of the Closing Date. In the event of a Sale effected in a
series of related transactions as contemplated by clause (ii) of the definition
of "Sale," for purposes of determining the Applicable Percentage such Sale shall
be deemed to have been consummated on the date of consummation of the first
transaction included in such Sale.
"SALE AMOUNT DIFFERENCE" means the Sale Amount minus the Threshold
Amount.
"SALE AMOUNT" means the Net Proceeds received by the Purchaser and/or
its affiliates in connection with a Sale.
"NET PROCEEDS" means (i) the gross purchase price minus (ii) all
expenses, fees and taxes incurred or reasonably anticipated to be incurred by
the Purchaser or any of its affiliates in connection with a Sale. The amount of
the Net Proceeds resulting from a Sale shall not include the pro rata expenses,
fees and taxes associated with a transfer of assets other than the capital stock
and assets of P1 UK, P1 International and their subsidiaries and shall be
determined by the mutual agreement of the Purchaser and Protection One (or, in
the absence of such agreement, by an Investment Banker).
<PAGE>
"THRESHOLD AMOUNT" means (i) the Sale Percentage multiplied by the
Adjusted Base Amount plus (ii) Other Asset Value.
"SALE PERCENTAGE" means (i) in the event of a Sale of all the capital
stock or assets of P1 UK and P1 International, 100%; and (ii) in the event of a
Sale of less than all of the capital stock or assets of P1 UK and P1
International or the Sale of the capital stock of one or more subsidiaries of P1
UK or P1 International, the percentage determined by mutual agreement of the
Purchaser and Protection One (or, in the absence of such agreement, by an
Investment Banker) representing the estimated then current aggregate fair market
value of the capital stock or assets of P1 UK, P1 International and their
subsidiaries transferred directly or indirectly in such Sale by the Purchaser
and its affiliates as a percentage of the estimated then current aggregate fair
market value of all of the capital stock of P1 UK and P1 International
beneficially owned by the Purchaser and its affiliates immediately preceding
such Sale.
"ADJUSTED BASE AMOUNT" means (i) $225 million, plus (ii) the Aggregate
Imputed Carrying Charge, plus (iii) Capital Additions, minus (iv) Capital
Deductions.
"AGGREGATE IMPUTED CARRYING CHARGE" means the sum of the Daily Imputed
Carrying Charges for each day from and including the date of this Agreement
through and including the date of consummation of the applicable Sale.
"DAILY IMPUTED CARRYING CHARGE" means, with respect to any applicable
day, the product of (i) $225 million plus Capital Additions made prior to such
day minus Capital Deductions made prior to such day, (ii) the Prime Rate as of
such date and (iii) 1 divided by 365.
"PRIME RATE" means the prime rate as announced from time to time by
Chase Manhattan Bank, New York, New York.
"CAPITAL ADDITIONS" means the aggregate value of capital contributed to
P1 UK, P1 International or their subsidiaries by the Purchaser and its
affiliates (other than P1 UK, P1 International and their subsidiaries) following
the date of this Agreement and prior to the date of the applicable Sale, as
determined by mutual agreement of the Purchaser and Protection One (or, in the
absence of such agreement, an Investment Banker).
"CAPITAL DEDUCTIONS" means the aggregate value of capital distributed
to the Purchaser and its affiliates (other than P1 UK, P1 International and
their subsidiaries) by P1 UK, P1 International and their subsidiaries following
the date of this Agreement and prior to the date of the applicable Sale, as
determined by mutual agreement of the Purchaser and Protection One (or, in the
absence of such agreement, an Investment Banker).
"OTHER ASSET VALUE" means the aggregate fair market value of the
capital stock and assets, other than the capital stock and assets of P1 UK, P1
International and
<PAGE>
their subsidiaries, transferred directly or indirectly by the Purchaser and its
affiliates in such Sale, as determined by mutual agreement of the Purchaser and
Protection One (or, in the absence of such an agreement, an Investment Banker).
(c) Set forth on Schedule 6.1 of the Disclosure Schedule are
illustrative examples of the calculation of payments required under this
Section.
6.2 Confidentiality. The Confidentiality Agreement, dated as of January
21, 2000, between Protection One and the Purchaser is hereby terminated
effective as of the Closing Date.
6.3 Further Assurances. From time to time after the Closing Date, each of
the Sellers and the Purchaser shall use commercially reasonable efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, the Seller
Documents and the Purchaser Documents, and to cooperate with each other in
connection with the foregoing.
6.4 Public Announcements. Sellers and the Purchaser agree to issue a
mutually agreed upon joint press release with respect to the execution of this
Agreement, the Seller Documents and the Purchaser Documents and the consummation
of the transactions contemplated hereby and thereby.
6.5 Books and Records; Personnel.
(a) From and after the Closing Date, each party hereto shall afford the
other, including its accountants, counsel and other designated representatives,
reasonable access (including using reasonable efforts to give access to persons
or firms possessing information) and duplicating rights during normal business
hours to all records, books, contacts, instruments, computer data and other data
and information in such party's possession relating to the business and affairs
of the others (other than data and information subject to an attorney/client or
other privilege), insofar as such access is reasonably required by the other
parties including, without limitation, for audit, accounting and litigation
purposes, as well as for purposes of fulfilling disclosure and reporting
obligations.
(b) Each party hereto shall use reasonable efforts to make available to
the other parties to this Agreement, upon written request, its officers,
directors, employees and agents as witnesses to the extent that such persons may
reasonably be required in connection with any legal, administrative or other
proceedings arising out of the business of the others in which the requesting
party may from time to time be involved.
(c) Except as otherwise required by applicable law or agreed to in
writing, each party hereto shall, and shall cause each of their respective
subsidiaries to, retain all information relating to the businesses and affairs
of the other parties to this
<PAGE>
Agreement in accordance with the past practice of such parties. Notwithstanding
the foregoing, any party may destroy or otherwise dispose of any such
information at any time, providing that, prior to such destruction or disposal,
(a) such party shall provide no less than 30 days' prior written notice to the
other parties, specifying the information proposed to be destroyed or disposed
of, and (b) if the recipient of such notice shall request in writing prior to
the scheduled date for such destruction or disposal that any of the information
proposed to be destroyed or disposed of be delivered to such requesting party,
the party proposing the destruction or disposal shall promptly arrange for the
delivery of such of the information as was requested at the expense of the
requesting party.
(d) Each party providing information or witnesses under this Section
6.5 to the others shall be entitled to receive from the recipients, upon the
presentation of invoices therefor, payment for all reasonable out-of-pocket
costs and expenses incurred in providing such information or witnesses.
6.6 Confidentiality. Sellers shall hold and shall cause their respective
directors, officers, employees, agents, consultants and advisors to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law, all
confidential, proprietary or other non-public information or trade secrets
concerning P1 UK, P1 International, P1 Investments and their respective
subsidiaries except to the extent that such information can be shown to have
been (a) in the public domain through no fault of such party, (b) later lawfully
acquired on a non-confidential basis from other sources by the party to which it
was furnished or (c) developed independently by the representatives of such
recipient. Sellers shall not release or disclose and shall cause their
respective directors, officers, employees, agents, consultants and advisors not
to release or disclose any such information to any other person, except its
auditors, attorneys, financial advisors, bankers and other consultants and
advisors who shall be advised of and comply with the provisions of this Section.
6.7 Cancellation of Intercompany Liabilities. Effective as of the Closing
the parties hereby cancel all liabilities between Sellers and their subsidiaries
(other than P1 UK, P1 International, P1 Investments or their respective
subsidiaries), on the one hand, and P1 UK, P1 International, P1 Investments or
their respective subsidiaries, on the other hand, with the exception of the
liabilities arising pursuant to the express provisions of this Agreement
(including Article VII), the Seller Documents and the Purchaser Documents.
Further, the parties to this Agreement irrevocably covenant to refrain from,
directly or indirectly, asserting any claim or demand, or commencing,
instituting, or causing to be commenced, any proceeding of any kind against the
other parties to this Agreement based upon any matter purported to be released
hereby.
6.8 Use of Names.
(a) Until the one year anniversary of a UK Change of Control Event (as
defined below), P1 UK and its subsidiaries shall have the sole and exclusive
right to
<PAGE>
use in the United Kingdom in connection with the ownership and conduct of the
Business and the Multi-Family Monitoring Business (as defined in the
Contribution Agreement) the name Protection One, including each of the
trademarks, trade names, service marks and other proprietary rights related to
the Protection One name and any and all designs, logos and slogans, related to
the Protection One name, and all other rights (whether tangible or intangible,
statutory, at common law or otherwise) in connection therewith, whether alone or
in combination with one or more other words or marks in connection therewith
(the "PROTECTION ONE NAMES"); provided that dealers and marketing affiliates of
P1 UK and its subsidiaries shall be permitted to use the Protection One Names in
the United Kingdom solely on behalf of P1 UK and its subsidiaries and within
their permitted scope of use; and provided further that, any purchaser of any of
the businesses of P1 UK or its subsidiaries (not constituting a UK Change of
Control Event) within the United Kingdom shall also be permitted to use until
the first anniversary of the date of such sale the Protection One Names within
the scope of use of P1 UK and its subsidiaries hereunder. Notwithstanding
anything herein to the contrary, following the one year anniversary of a UK
Change of Control Event, no person other than Protection One shall have any
further ownership or other rights in the United Kingdom with respect to any
Protection One Name. Notwithstanding the foregoing sentence and subject to
Section 6.10(a), until the two year anniversary of a UK Change of Control Event,
the Sellers and each of their affiliates shall be prohibited from using in the
United Kingdom, or transferring to any other person the ownership of or any
right to use in the United Kingdom, in connection with any business whatsoever,
any Protection One Name.
(b) Until the one year anniversary of a Continental Europe Change of
Control Event (as defined below), P1 International and its subsidiaries shall
have the sole and exclusive right to use in all of the countries of continental
Europe ("CONTINENTAL EUROPE" and with the United Kingdom, "EUROPE") in
connection with the ownership and conduct of the Business and the Multi-Family
Monitoring Business the Protection One Names; provided that dealers and
marketing affiliates of P1 International and its subsidiaries shall be permitted
to use the Protection One Names in Continental Europe solely on behalf of P1
International and its subsidiaries and within their permitted scope of use; and
provided further that, any purchaser of any of the businesses of P1
International or its subsidiaries (not constituting a Continental Europe Change
of Control Event) within Continental Europe shall also be permitted to use until
the first anniversary of the date of such sale the Protection One Names within
the scope of use of P1 International and its subsidiaries hereunder.
Notwithstanding anything herein to the contrary, following the one year
anniversary of a Continental Europe Change of Control Event, no person other
than Protection One shall have any further ownership or other rights in
Continental Europe with respect to any Protection One Name. Notwithstanding the
foregoing sentence and subject to Section 6.10(a), until the two year
anniversary of a Continental Europe Change of Control Event, the Sellers and
each of their affiliates shall be prohibited from using in Continental Europe or
transferring to any other person the ownership of or any right to use in
Continental Europe in connection with any business whatsoever, any Protection
One Name.
<PAGE>
(c) For purposes of this Agreement, a change of control event shall
mean any sale, merger, consolidation or other business combination or
transaction as a result of which the Purchaser no longer beneficially owns,
directly or indirectly, at least 50% of the outstanding stock of (i) P1 UK or
any successor entity thereto that conducts directly or indirectly the Business
and/or the Multi-Family Monitoring Business in the United Kingdom (a "UK CHANGE
OF CONTROL EVENT") or (ii) P1 International or any successor entity thereto that
conducts directly or indirectly the Business and/or the Multi-Family Monitoring
Business in Continental Europe (a "CONTINENTAL EUROPE CHANGE OF CONTROL EVENT").
(d) Nothing in this Section shall be deemed (i) to grant P1 UK, P1
International and their respective subsidiaries any rights to use the Protection
One Names for any purpose outside of Europe or (ii) to limit in any manner or at
any time the ownership of and all rights of Sellers or any of their affiliates
to use the Protection One Names outside of Europe. The Purchaser and its
affiliates shall use efforts to maintain the integrity and not impair the
goodwill of the Protection One Name and the Sellers, comparable to the efforts
they use to maintain the integrity and not impair the goodwill of the
Purchaser's and its affiliates other trademarks, tradenames, service marks and
other proprietary rights. The Purchaser shall notify the Sellers of any third
party actions of which the Purchaser becomes aware that may infringe the
Protection One Names.
6.9 Mail. Following the Closing Date, each of the parties hereto and their
respective subsidiaries may receive mail, telegrams, packages and other
communications properly belonging to the other parties hereto and their
respective subsidiaries. Accordingly, at all times after the Closing Date, each
of the parties authorizes the other parties hereto and their respective
subsidiaries to receive and open all mail, telegrams, packages and other
communications received by them and not unambiguously intended for the other
parties hereto or their respective subsidiaries or any of the other parties'
officers or directors specifically in their capacities as such, and to retain
the same to the extent that they relate to the business of the receiving parties
or, to the extent that they do not relate to the business of the receiving
parties and do relate to the business of the other parties hereto and their
respective subsidiaries, or to the extent that they relate to both businesses,
the receiving parties shall promptly contact the other parties by telephone for
delivery instructions and such mail, telegrams, packages or other communications
(or, in case the same relate to both businesses, copies thereof) shall promptly
be forwarded to the other parties in accordance with their delivery
instructions. The foregoing provisions of this Section shall constitute full
authorization to the postal authorities, all telegraph and courier companies and
all other persons to make deliveries to the relevant parties addressed to them
or to any of their officers or directors specifically in their capacities as
such. The provisions of this Section are not intended to and shall not be deemed
to constitute an authorization by any party to permit the others to accept
service of process on their behalf, and no party shall be deemed to be the agent
of the others for service of process purposes or for any other purpose.
<PAGE>
6.10 Non-Competition and Non-Solicitation.
(a) For a period of four (4) years from the date hereof, Sellers shall
refrain and shall cause their respective subsidiaries to refrain from directly
or indirectly, in any manner whatsoever, engaging in, investing in, acquiring
any equity securities of, or entering into any material business relationship
with, any person which is engaged in Europe in the Business or the Multi-Family
Monitoring Business (as defined in the Contribution Agreement).
(b) For a period of two (2) years from the date hereof, except as may
result from the ordinary course of conduct of the businesses of Sellers and
their respective subsidiaries, Sellers shall refrain and shall cause their
respective subsidiaries to refrain from diverting, taking away or interfering
with or attempting to divert, take away or interfere with any of the former or
existing customers, clients or suppliers of P1 UK, P1 International or any of
their subsidiaries.
(c) For a period of two (2) years from the date hereof, Sellers shall
refrain and cause their respective subsidiaries to refrain from employing,
offering employment to, offering a retainer to or endeavoring to entice away
from P1 UK, P1 International or any of their subsidiaries, any of the employees
of P1 UK, P1 International or any of their subsidiaries, except pursuant to
general advertisements of employment not specifically targeted at such
employees.
ARTICLE VII - INDEMNIFICATION
7.1 Indemnification by Sellers. From and after the Closing, Sellers shall
indemnify the Purchaser and its affiliates and officers, directors, employees,
agents and representatives (each, a "PURCHASER INDEMNIFIED PARTY") against, and
hold them harmless from, against and in respect of any loss, liability, claim,
damage, charge, reasonable cost or expense (including reasonable legal fees and
expenses) ("LOSS"), imposed on, sustained, incurred or suffered by any the
Purchaser Indemnified Party (payable promptly upon written request), to the
extent relating to, arising out of or resulting from any breach of any
representation or warranty or agreement or covenant under this Agreement made by
Sellers.
7.2 Indemnification by the Purchaser. From and after the Closing, the
Purchaser shall indemnify Sellers and their affiliates and each of their
respective officers, directors, employees, agents and representatives (each, a
"SELLER INDEMNIFIED PARTY") against, and hold them harmless from, against and in
respect of any Loss imposed on, sustained, incurred or suffered by any Seller
Indemnified Party (payable promptly upon written request), to the extent
relating to, arising out of or resulting from any breach of any representation
or warranty or agreement or covenant under this Agreement made by the Purchaser.
<PAGE>
7.3 Exclusive Remedy. The Purchaser and Sellers acknowledge that, except
for claims alleging fraud, their sole and exclusive remedy after the Closing
with respect to any and all claims relating to this Agreement shall be pursuant
to the indemnification provisions set forth in this Article.
7.4 Continuing Indemnification Obligation. The obligations of any party to
indemnify and hold harmless any other party pursuant to this Article (i) shall
not terminate and (ii) shall survive the sale or other transfer of any assets or
businesses or the assignment of any liabilities, with respect to any Loss
related to such assets, businesses or liabilities.
7.5 Procedures Relating to Indemnification.
(a) In order for a party (the "INDEMNIFIED PARTY") to be entitled to
any indemnification provided for under this Agreement in respect of, arising out
of or involving a claim made by any Person against the Indemnified Party (a
"THIRD PARTY CLAIM"), such Indemnified Party must notify the party with the
obligation to indemnify the Indemnified Party under this Agreement (the
"INDEMNIFYING PARTY") in writing (and in reasonable detail) of the Third Party
Claim promptly (but in no event more than 30 days) following receipt by such
Indemnified Party of notice of the Third Party Claim. The failure by any
Indemnified Party to so notify the Indemnifying Party shall not relieve the
Indemnifying Party from any Liability that it may have to such Indemnified
Party, except to the extent that the Indemnifying Party demonstrates that it has
been actually prejudiced by such failure. Thereafter, the Indemnified Party
shall deliver to the Indemnifying Party, promptly following the Indemnified
Party's receipt thereof, copies of all notices and documents (including court
papers) received by the indemnified party relating to the Third Party Claim.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided, however, that such counsel is not reasonably
objected to by the Indemnified Party. Should the Indemnifying Party so elect to
assume the defense of a Third Party Claim, the Indemnifying Party shall not be
liable to the Indemnified Party for any legal expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof. If the
Indemnifying Party assumes such defense, the Indemnified Party shall have the
right to participate in the defense thereof and to employ counsel (including (i)
Weil, Gotshal & Manges LLP in the case Protection One is the Indemnified Party,
(ii) Sullivan & Cromwell in the case Purchaser is the Indemnified Party and
(iii) any other counsel not reasonably objected to by the Indemnifying Party) at
its own expense separate from the counsel employed by the Indemnifying Party (it
being understood that the Indemnifying Party shall be liable for and shall
reimburse the Indemnified Party for all costs, fees and expenses (including the
reasonable fees and expenses of counsel employed by the Indemnified Party) for
any period during which the Indemnifying Party has not assumed the defense
thereof (other than during any period in which the Indemnified Party shall have
failed to give notice of the Third Party Claim as provided
<PAGE>
above)). If the Indemnifying Party chooses to defend or prosecute a Third Party
Claim, all the Indemnified Parties shall cooperate in the defense or prosecution
thereof. Such cooperation shall include the retention and (upon the Indemnifying
Party's request) the provision to the Indemnifying Party of records and
information that are reasonably relevant to such Third Party Claim, and making
employees available on a mutually convenient basis during normal business hours
to provide additional information and explanation of any material provided
hereunder. Whether or not the Indemnifying Party assumes the defense of a Third
Party Claim, the Indemnifying Party shall not, without the Indemnified Party's
prior written consent, admit any Liability with respect to, or settle,
compromise or discharge, such Third Party Claim on a basis that would result in
(i) the imposition of a judgment that would restrict the future activity or
conduct of the Indemnified Party or any subsidiary or affiliate thereof, or (ii)
any monetary liability of the Indemnified Party that will not be paid or
reimbursed by the Indemnifying Party.
(c) In the event any Indemnified Party should have a claim against any
Indemnifying Party that does not involve a Third Party Claim being asserted
against or sought to be collected from such Indemnified Party, the Indemnified
Party shall deliver notice of such claim promptly (but in no event more than 30
days) following discovery by the Indemnified Party of such claim to the
Indemnifying Party. The failure by any Indemnified Party to so notify the
Indemnifying Party shall not relieve the Indemnifying Party from any liability
that it may have to such Indemnified Party, except to the extent that the
Indemnifying Party demonstrates that it has been actually prejudiced by such
failure. If the Indemnifying Party does not notify the Indemnified Party within
30 calendar days following its receipt of such notice that the Indemnifying
Party disputes its liability to the Indemnified Party, such claim specified by
the Indemnified Party in such notice shall be conclusively deemed a liability of
the Indemnifying Party and the Indemnifying Party shall pay the amount of such
liability to the Indemnified Party on demand or, in the case of any notice in
which the amount of the claim (or any portion thereof) is estimated, on such
later date when the amount of such claim (or such portion thereof) becomes
finally determined. If the Indemnifying Party has timely disputed its liability
with respect to such claim, as provided above, the Indemnifying Party and the
Indemnified Party shall proceed in good faith to resolve the dispute prior to
bringing any proceeding or action in court.
(d) Any claim for indemnification under this Agreement shall describe
the claim in reasonable detail, include copies of any available material written
evidence thereof and indicate the estimated amount of such claim.
7.6 Insurance Proceeds. The amount that any Indemnifying Party is or may
be required to pay to any Indemnified Party pursuant to this Article shall be
reduced (including, without limitation, retroactively) by any insurance proceeds
or other amounts actually recovered by or on behalf of such Indemnified Party in
reduction of the related Loss. If an Indemnified Party shall have received the
full amount of the payment required by this Agreement from an Indemnifying Party
in respect of any Loss and shall subsequently actually receive insurance
proceeds, or other amounts in respect of such Loss as specified above, then such
Indemnified Party shall pay to such Indemnifying
<PAGE>
Party a sum equal to the amount of such insurance proceeds or other amounts
actually received after deducting therefrom all of the Indemnified Party's Loss,
costs and expenses associated with the recovery of any such amount.
7.7 Subrogation. In the event of payment by an Indemnifying Party to any
Indemnified Party in connection with any Third-Party Claim, such Indemnifying
Party shall be subrogated to and shall stand in the place of such Indemnified
Party as to any events or circumstances in respect of which such Indemnified
Party may have any right or claim relating to such Third-Party Claim. Such
Indemnified Party shall cooperate with such Indemnifying Party in a reasonable
manner, and at the cost and expense of such Indemnifying Party, in prosecuting
any subrogated right or claim.
7.8 Third Party Beneficiaries. The indemnification provided for by this
Article is for the benefit of the parties hereto and the respective Indemnified
Parties and shall not inure to the benefit of any other third party or parties
and shall not relieve any insurer who would otherwise be obligated to pay any
claim of the responsibility with respect thereto or, solely by virtue of the
indemnification provisions hereof, provide any subrogation rights with respect
thereto and each party agrees to waive such rights against the other to the
fullest extent permitted.
7.9 After-Tax Indemnification Payments. Except as otherwise expressly
provided herein, any indemnification payment made by any Indemnifying Party
under this Article shall be computed by taking into account the value of any and
all applicable deductions, losses, credits, offsets or other items for federal,
state or other tax purposes attributable to the payment of the indemnified
Liability by the Indemnified Party and any Tax incurred by the Indemnified Party
attributable to receipt of the indemnification payment.
7.10 Limits of Indemnification.
(a) No amount shall be payable under this Article VII by Sellers in
respect of any breach of the representations and warranties contained in
Sections 4.1(b), 4.5, 4.6, 4.7, 4.8, 4.9 and 4.10 ("SPECIFIED BREACHES") unless
and until the aggregate amount otherwise payable by Seller in respect of all
Specified Breaches exceeds two million two hundred fifty thousand dollars
($2,250,000) (the "DEDUCTIBLE AMOUNT"), in which event, subject to Section
7.10(b), the Sellers shall be responsible for all amounts payable under this
Article VII in respect of Specified Breaches in excess of the Deductible Amount.
(b) No amount shall be payable under this Article VII by Sellers in
respect of any Specified Breach if the aggregate amount previously paid by
Sellers under this Article VII in respect of Specified Breaches plus the
Deductible Amount shall, in the aggregate, be equal to or exceed eleven million
two hundred fifty thousand dollars ($11,250,000).
<PAGE>
(c) Nothing contained in this Section 7.10 shall limit in any manner
Sellers' obligations under this Article VII in respect of breaches by Sellers of
any representations and warranties, other than those contained in Sections
4.1(b), 4.5, 4.6, 4.7, 4.8, 4.9 and 4.10, or of any covenants or agreements of
Sellers contained in this Agreement.
ARTICLE VIII - MISCELLANEOUS
8.1 Entire Agreement. This Agreement (with its Schedules and Exhibits)
contains, and is intended as, a complete statement of all of the terms and the
arrangements between the parties hereto with respect to the matters provided for
herein, and supersedes any and all previous agreements and understandings
between the parties hereto with respect to those matters.
8.2 Termination. This Agreement may be terminated by the written agreement
of the Purchaser and Protection One on behalf of the Sellers; provided that,
from and after the Closing, such agreement to terminate shall have been approved
by an affirmative vote of a majority of the Directors of Protection One not
affiliated with Western or its other subsidiaries. Upon any termination of this
Agreement pursuant to this Section 8.2, no party hereto shall thereafter have
any further liability or obligation hereunder, but no such termination shall
relieve the parties hereto of any liability to the other non-breaching parties
hereto for any breach of this Agreement prior to the date of such termination.
8.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of Delaware (without regard to principles
of conflict of laws).
8.4 Nonsurvival of Representation and Warranties. The representations and
warranties contained in Sections 4.1(b), 4.5, 4.6, 4.7, 4.8, 4.9 and 4.10 shall
survive beyond the Closing Date until May 31, 2001, and all other
representations and warranties made herein shall survive beyond the Closing Date
until the expiration of the relevant statutes of limitation, and in each case
only to the extent that any claims arising thereunder are asserted by a party by
written notice given to the other party prior to such expiration. This Section
8.4 shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Closing Date.
8.5 Transfer Taxes. The Purchaser and the Sellers each shall be
responsible for and pay one-half of the aggregate amount of (a) all transfer and
documentary taxes and fees imposed with respect to instruments of conveyance in
the transactions contemplated hereby, and (b) all sales, use, gains, excise and
other transfer or similar taxes on the transfer of the P1 UK Stock, the P1
International Stock and the P1 Investments Stock provided for hereunder. The
Purchaser or any Seller, as the case may be, shall execute and deliver to the
other parties at the Closing any certificates or
<PAGE>
other documents as the other may reasonably request to perfect any exemption
from any such transfer, documentary, sales, gains, excise or use tax.
8.6 Expenses. Each of the parties hereto shall bear its own expenses
(including, without limitation, fees and disbursements of its counsel,
accountants and other experts), incurred by it in connection with the
preparation, negotiation, execution, delivery and performance of this Agreement,
each of the other documents and instruments executed in connection with or
contemplated by this Agreement and the consummation of the transactions
contemplated hereby and thereby. Sellers shall reimburse P1 UK, P1
International, P1 Investments and their respective subsidiaries for any
out-of-pocket expenses incurred by them prior to the Closing in connection with
the preparation, negotiation, execution, delivery and performance of this
Agreement, each of the other documents and instruments executed in connection
with or contemplated by this Agreement and the consummation of the transactions
contemplated hereby and thereby.
8.7 Table of Contents and Headings. The table of contents and section
headings of this Agreement are for reference purposes only and are to be given
no effect in the construction or interpretation of this Agreement.
8.8 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given when delivered personally or four
days after being mailed by registered mail, return receipt requested, to a party
at the following address (or to such other address as such party may have
specified by notice given to the other party pursuant to this provision):
If to any Seller, to:
Protection One, Inc.
600 Corporate Point, 12th Floor
Culver City, CA 90230
Telephone: (310) 342-6322
Facsimile: (310) 649-3855
Attention: Chief Financial Officer
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153-0119
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
Attention: Simeon Gold, Esq.
<PAGE>
If to the Purchaser, to:
Westar Capital, Inc.
818 South Kansas Ave.
Topeka, KS 66612
Telephone: (785) 575-6320
Facsimile: (785) 575-1936
Attention: President
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004-2498
Telephone: (212) 558-4000
Facsimile: (212) 558-3588
Attention: Stephen M. Kotran, Esq.
8.9 Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
8.10 Binding Effect; No Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. Nothing in this Agreement shall create or be deemed to create any third
party beneficiary rights in any person or entity not party to this Agreement. No
assignment of this Agreement or of any rights or obligations hereunder may be
made by any party (by operation of law or otherwise) without the prior written
consent of each of the other parties hereto, and any attempted assignment
without such required consents shall be void provided, however, that (i) the
Purchaser may assign all of its rights and obligations hereunder to any of its
affiliates provided that remains liable for all of its obligations hereunder;
(ii) the Purchaser may assign its rights and obligations under Section 6.8 and
6.9 to any person in connection with the sale of all or substantially all of the
assets of P1 International and P1 UK to such person and (iii) the Purchaser may
assign all of its rights and obligations hereunder to any other person provided
Protection One consents to such assignment, such consent not to be unreasonably
withheld.
8.11 Amendments. This Agreement may be amended, supplemented or modified,
and any provision hereof may be waived, only pursuant to a written instrument
making specific reference to this Agreement signed by each of the parties
hereto; provided that, from and after the Closing, any such amendment,
supplement, modification or waiver entered into by Protection One on behalf of
itself or the other Sellers shall have been approved by an affirmative vote of a
majority of the Directors of Protection One not affiliated with Western or its
other subsidiaries.
<PAGE>
8.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURES BEGIN ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
instrument as of the date and year first above written.
PROTECTION ONE, INC.
By: /s/ John E. Mack III
--------------------------------
Name: John E. Mack III
Title: Chief Executive Officer
PROTECTION ONE ALARM
MONITORING, INC.
By: /s/ John E. Mack III
--------------------------------
Name: John E. Mack III
Title: Chief Executive Officer
WESTAR CAPITAL, INC.
By: /s/ Cynthia S. Couch
--------------------------------
Name: Cynthia S. Couch
Title: Treasurer
AMENDMENT NO. 2 TO
CONTRIBUTION AGREEMENT
THIS AMENDMENT NO. 2 dated as of February 29, 2000 (this "Amendment") to
the Contribution Agreement, dated as of July 30, 1997 and amended on October 2,
1997 (the "Contribution Agreement"), by and between Protection One, Inc., a
Delaware corporation ("Protection One"), and Western Resources, Inc., a Kansas
corporation ("Western").
Capitalized terms used but not defined in this Amendment shall have the
meaning given such terms in the Contribution Agreement.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to the Agreement dated the date hereof among Westar
Capital, Inc., a subsidiary of Western ("Westar"), Protection One and Protection
One Alarm Monitoring, Inc. (the "Agreement"), Westar will purchase and acquire
all of the issued and outstanding shares of capital stock of Protection One (UK)
plc ("P1 UK" and such stock, "P1 UK Stock"), Protection One International, Inc.
("P1 International" and such stock, "P1 International Stock"), and Protection
One Investments, Inc. ("P1 Investments" and such stock, "P1 Investments Stock");
and
WHEREAS, P1 Investments holds certain marketable securities (the
"Portfolio") listed on Schedule A hereto, and certain securities of Guardian
International Inc. ("Guardian" and such stock, "Guardian Stock") listed on
Schedule B hereto; and
WHEREAS, Section 3.15(a) of the Contribution Agreement, among other
things, restricts Western and its Subsidiaries (other than Protection One and
its Subsidiaries) from engaging in, or investing in, or acquiring any equity
securities of, or entering into any material business relationship with, any
person engaged in the Business (the "Section 3.15 Restriction"); and
WHEREAS, P1 UK, P1 International and Guardian are, and certain issuers of
the securities in the Portfolio may be, engaged in the Business; and
WHEREAS, pursuant to the Agreement, it is necessary for Protection One to
deliver to Westar this Amendment of the Section 3.15(a) Restriction at the
closing of the Agreement on the date hereof in order to consummate the
transactions contemplated in the Agreement; and
WHEREAS, pursuant to Section 6.2 of the Contribution Agreement, Protection
One may not amend, supplement or otherwise modify any provision of the
Contribution Agreement unless such amendment, supplement or modification shall
have been approved by the affirmative vote of a majority of the Continuing
Directors; and
<PAGE>
Schedule B
----------
WHEREAS, Messrs. Enis and Wilson constitute all of the Continuing
Directors and desire to authorize the parties to amend the Contribution
Agreement as contemplated herein; and
WHEREAS, Western is agreeable to amending the Contribution Agreement as
contemplated herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
Section 1. Amendment to the Contribution Agreement. Section 3.15 of the
Contribution Agreement is hereby amended to add a new Section 3.15(c) as
follows:
"(i) Notwithstanding anything to the contrary contained in Section
3.15(a) hereof, and subject to the limitations contained in this Section
3.15(c), Western or any subsidiary of Western shall be permitted to acquire and
own the Pl UK Stock, the P1 International Stock, the PI Investments Stock, the
Portfolio and the Guardian Stock (each as defined in the Agreement dated as of
February 29, 2000, among Westar Capital, Inc., Protection One Alarm Monitoring,
Inc. and Protection One) and to exercise and enjoy all rights incident to the
ownership of such securities, including the right to receive dividends, to vote
as a stockholder and to nominate persons to serve on the board of directors of
the issuers of such securities (the "Stock Rights").
(ii) Notwithstanding anything to the contrary contained in Section
3.15(a) hereof, and subject to the limitations contained in this Section
3.15(c), Western or any Subsidiary of Western shall not be prohibited from
engaging in, or investing in, acquiring any equity securities of, or entering
into any material business relationship with, any person engaged in the Business
solely in the United Kingdom or any of the countries of continental Europe.
(iii) Notwithstanding anything to the contrary contained in Section
3.15(a) hereof, and subject to the limitations contained in this Section
3.15(c), Western or any Subsidiary of Western shall be permitted to acquire and
own common securities of the issuers whose securities are included in the
Portfolio and would otherwise be subject to the restrictions contained in
Section 3.15(a) hereof and to exercise and enjoy all rights incident to the
ownership of such securities, including Stock Rights, provided that Western and
its Subsidiaries shall not at any time be permitted to acquire or own common
securities of any such issuer otherwise subject to the restrictions contained in
Section 3.15(a) hereof organized under the laws of Canada in an aggregate amount
exceeding ten percent (10%) of the outstanding common securities of such issuer
or to acquire or own common securities of any such issuer otherwise subject to
the restrictions contained in Section 3.15(a) hereof organized under the laws of
the United States or any state thereof in an aggregate amount exceeding five
percent (5%) of the outstanding common securities of such issuer.
2
<PAGE>
(iv) Notwithstanding anything to the contrary contained in Section
3.15(a) hereof, and subject to the limitations contained in this Section
3.15(c), Western or any subsidiary of Western shall be permitted to acquire and
own securities issued by the issuer listed on Schedule C hereto (the "Issuer")
and to exercise and enjoy all rights incident to the ownership of such
securities, including the Stock Rights, provided that (except as provided in
clauses (v) and (vi) hereof) Western and its Subsidiaries shall not be permitted
to acquire or own securities of the Issuer constituting in the aggregate an
amount exceeding either (x) securities issued by the Issuer having the right in
the aggregate to cast 50% of the votes entitled to be cast at meetings of the
stockholders of the Issuer or (y) common securities issued by the Issuer and
securities convertible into or exchangeable for common securities of the Issuer
constituting in the aggregate 50% of the common securities of the Issuer
calculated based on the assumption that all securities convertible into or
exchangeable for common securities of the Issuer owned by Western and its
Subsidiaries or any other person have been so converted or exchanged (the first
to occur of (x) and (y), the "Issuer Ownership Threshold").
(v) Notwithstanding anything to the contrary contained in Section
3.15(a) hereof, and subject to the limitations contained in this Section
3.15(c)(v), Western or any Subsidiary of Western shall be permitted to acquire
and own securities issued by the Issuer and to exercise and enjoy all rights
incident to the ownership of such securities, including the Stock Rights, in an
aggregate amount in excess of the Issuer Ownership Threshold. Prior to entering
into any acquisition agreement with Issuer to acquire and own its securities in
an aggregate amount in excess of the Issuer Threshold Ownership, Western or any
Subsidiary, as the case may be, shall ensure that Protection One or any
Subsidiary of Protection One is afforded the opportunity to review all
information received by Western or any Subsidiary from Issuer. Promptly
following the date on which Western and its Subsidiaries acquire securities of
the Issuer exceeding the Issuer Ownership Threshold, Western shall so notify
Protection One. For a period of 180 days following receipt of such notice by
Western to Protection One, Protection One shall (A) have the right to review all
of the same financial and other information made available to or generated by
Western or any of its representatives or advisors in connection with its review
of Issuer and to receive from Issuer and Western and its Subsidiaries such
additional information as it may reasonably request in connection with its due
diligence review, and (B) have the right, exercisable by the vote of a majority
of the Directors of Protection One not affiliated with Western or its other
Subsidiaries, to require Western and its Subsidiaries to transfer, without
recourse to Western or any of its Subsidiaries or affiliates, all of Western's
and its Subsidiaries' rights, title and interest in the equity securities of the
Issuer, as well as all rights and obligations of Western or its Subsidiaries
under the acquisition agreement, if any, entered into with respect to the
securities of Issuer, to Protection One or any Subsidiary of Protection One. In
the event that Protection One or a Subsidiary of Protection One purchases all of
Western's and its Subsidiaries' rights, title and interest in the equity
securities of the Issuer as contemplated by the immediately preceding sentence,
promptly following the date on which Western and its Subsidiaries subsequently
acquire securities of the Issuer constituting in the aggregate an amount
exceeding either (x) securities issued by the Issuer having the right in the
aggregate to cast 5% of the votes entitled to be cast at meetings of the
stockholders of the Issuer or (y) common securities issued by the Issuer and
securities convertible into
3
<PAGE>
or exchangeable for common securities of the Issuer constituting in the
aggregate 5% of the common securities of the Issuer calculated based on the
assumption that all securities convertible into or exchangeable for common
securities of the Issuer owned by Western and its Subsidiaries or any other
person have been so converted or exchanged (the first to occur of (x) and (y),
the "Issuer Subsequent Ownership Threshold"), Western shall so notify Protection
One or its Subsidiary. For a period of 90 days following receipt of such notice
by Western to Protection One, Protection One shall have the right, exercisable
by the vote of a majority of the Directors of Protection One not affiliated with
Western or its Subsidiaries, to require Western and its Subsidiaries to
transfer, without recourse to Western or any of its Subsidiaries or affiliates,
all of Western's and its Subsidiaries' rights, title and interest in such equity
securities of the Issuer to Protection One or its Subsidiaries. In consideration
of the transfer of Western's or its Subsidiaries' rights, title and interest in
the securities of Issuer and the acquisition agreement, if any, with respect
thereto as contemplated by this clause (v), Protection One or its Subsidiary
shall pay (as provided below) Western or its Subsidiaries an amount equal to the
sum of (x) the purchase price paid by Western or its Subsidiaries to acquire the
securities of Issuer (the "Purchase Price"), and (y) a carrying charge equal to
the product of (A) the Purchase Price, (B) the average of the prime rates as
announced from time to time by Chase Manhattan Bank, New York, New York in
effect for each day during the period referred to in clause (C) of this Section
3.15(c)(v), and (C) the number of days from and including the date of the
consummation of the acquisition of the Issuer's securities by Western or its
Subsidiaries up to but not including the date of transfer from Western or its
Subsidiaries to Protection One or its Subsidiary of such securities, divided by
365; provided, however, that the parties acknowledge that the foregoing formula
shall be applied separately with respect to each date on which Western or its
Subsidiaries purchased securities of Issuer. The parties hereto agree that any
decision by Protection One or its Subsidiary to finance all or any portion of
the Purchase Price upon exercise of the option shall be made by vote of a
majority of the Directors of Protection One or its Subsidiary not affiliated
with Western or its other Subsidiaries.
(vi) Notwithstanding anything to the contrary contained in Section
3.15(a) hereof, and subject to the limitations contained in this Section
3.15(c), in the event that Protection One or its Subsidiary does not elect to
require Western and its Subsidiaries to transfer to Protection One or its
Subsidiary the equity securities of Issuer following the acquisition by Western
and its Subsidiaries of securities of the Issuer in an aggregate amount
exceeding the Issuer Ownership Threshold, then from and after the date falling
180 days after the date of receipt of the notice by Western that Western and its
Subsidiaries acquired securities of the Issuer in an aggregate amount exceeding
the Issuer Ownership Threshold, Western and its Subsidiaries shall not be
prohibited from engaging in, or investing in, acquiring any equity securities
of, or entering into any material business relationship with the Issuer."
Section 2. Representations and Warranties. Each party hereto hereby
represents and warrants that (i) it/he has the power and authority and the legal
right to make, deliver and perform this Amendment, (ii) it/he has taken all
necessary actions to authorize the execution, delivery and performance of this
Amendment, and (iii) this Amendment is legal, valid and binding on, and
enforceable against, it/him.
4
<PAGE>
Section 3. Continuing Effect. Except as expressly waived or otherwise
agreed hereby, the Contribution Agreement shall continue to be and shall remain
in full force and effect in accordance with its terms. This Amendment shall be
limited precisely as drafted and shall not constitute a waiver or amendment of
any other term, condition or provision of the Contribution Agreement.
Section 4. Governing Law. This Amendment shall be governed by, and
construed and interpreted in accordance with, the laws of the State of Delaware
(without regard to principles of conflict of laws).
Section 5. Counterparts. This Amendment may be executed by the parties
hereto on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
[SIGNATURE BEGIN ON NEXT PAGE]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of
the date and year first above written.
PROTECTION ONE, INC.
By: /s/ John E. Mack III
------------------------------------
Name: John E. Mack III
Title: Chief Executive Officer
WESTERN RESOURCES, INC.
By: /s/ William B. Moore
------------------------------------
Name: William B. Moore
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
AGREED TO AND
APPROVED HEREBY:
/s/ Ben M. Enis
- --------------------------
BEN M. ENIS
/s/ James Q. Wilson
- --------------------------
JAMES Q. WILSON
SECOND AMENDMENT OF CREDIT AGREEMENT
THIS SECOND AMENDMENT OF CREDIT AGREEMENT (this "AMENDMENT") is entered
into to be effective as of February 29, 2000, between PROTECTION ONE ALARM
MONITORING, INC., a Delaware corporation ("BORROWER"), each of the Persons which
is a signatory to this Amendment (collectively, "LENDERS"), and WESTAR CAPITAL,
INC., as Administrative Agent for the Lenders (in such capacity, together with
its successors in such capacity, "ADMINISTRATIVE AGENT").
R E C I T A L S
A. Borrower, Lenders and Administrative Agent entered into the Credit
Agreement dated as of December 21, 1998 (as renewed, extended, modified, and
amended from time to time, the "CREDIT AGREEMENT"; capitalized terms used herein
shall, unless otherwise indicated, have the respective meanings set forth in the
Credit Agreement), providing for a revolving credit facility in the original
maximum principal amount of $500,000,000.
B. Pursuant to a letter agreement dated as of September 30, 1999, Borrower
reduced the Total Commitment to $250,000,000.
C. The Lenders and the Administrative Agent entered into that certain
Assignment and Acceptance dated December 17, 1999 wherein the Administrative
Agent and the Lenders assigned all of their rights and obligations under the
Credit Agreement to Westar Capital, Inc.
D. Pursuant to that certain Agreement of even date herewith among
Borrower, POI and Westar Capital, Inc., Borrower is selling certain assets to
Westar Capital, Inc. and will utilize the cash proceeds thereof to prepay the
Principal Debt (the "AGREEMENT") as set forth herein.
E. Borrower, Lender, and Administrative Agent desire to further modify
certain provisions contained in the Credit Agreement, subject to the terms and
conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower, Lender, and
Administrative Agent agree as follows:
1. AMENDMENTS TO THE CREDIT AGREEMENT.
(A) SECTION 1.1 is hereby amended to delete the definitions of "APPLICABLE
MARGIN," "EBITDA," "INTEREST COVERAGE RATIO," "PERMITTED ACQUISITIONS," and
"TERMINATION DATE" in their entirety and replace such definitions with the
following:
APPLICABLE MARGIN means, as of any date of determination, the
interest margin over Base Rate or the Eurodollar Rate, as the case may be,
that corresponds to the Leverage Ratio set forth below on such date of
determination:
<TABLE>
<CAPTION>
===========================================================================================================
APPLICABLE APPLICABLE APPLICABLE
MARGIN MARGIN FOR MARGIN FOR
LEVEL LEVERAGE RATIO FOR BASE RATE EURODOLLAR COMMITMENT
BORROWINGS BORROWINGS FEES
===========================================================================================================
<S> <C> <C> <C> <C>
1 Less than or equal to 5.00:1 1.00% 2.25% 0.375%
- -----------------------------------------------------------------------------------------------------------
2 Greater than 5.00:1 but less 1.25% 2.50% 0.50%
than or equal to 5.25:1
- -----------------------------------------------------------------------------------------------------------
3 Greater than 5.25:1 but less 1.65% 3.00% 0.50%
than or equal to 5.50:1
- -----------------------------------------------------------------------------------------------------------
4 Greater than 5.50:1 2.15% 3.50% 0.50%
===========================================================================================================
</TABLE>
The Applicable Margin payable by the Borrower on the Borrowings
outstanding hereunder shall be adjusted on the date of receipt by the
Administrative Agent of the Financial Statements and Compliance
Certificates required to be delivered pursuant to SECTIONS 9.3(A) AND (B)
as tested using the Leverage Ratio for the most recent fiscal quarter. If
the Financial Statements and Compliance Certificates required pursuant to
SECTION 9.3(A) OR (B) are not received by the Administrative Agent by the
date required, the Applicable Margin shall be determined as if the
Leverage Ratio is greater than 5.50:1. From the date hereof until the
Borrower's Financial Statements for the fiscal quarter ended March 31,
2000 and corresponding Compliance Certificate are delivered pursuant to
SECTION 9.3(B), the Applicable Margin shall be determined based on Level
1.
EBITDA means, with respect to any Person for any fiscal period, an
amount equal to (a) consolidated net income of such Person for such
period, minus (b) the sum of (i) income tax credits, (ii) interest income,
(iii) gains from extraordinary items for such period, and (iv) any
aggregate net gain during such period arising from the sale, exchange, or
other disposition of capital assets by such Person (including any fixed
assets, whether tangible or intangible, and all inventory sold in
conjunction with the disposition of fixed assets, but excluding asset
sales in the ordinary course of business permitted pursuant to SECTION
10.11), in each case to the extent included in the calculation of
consolidated net income of such Person for such period in accordance with
GAAP, but without duplication, minus (c) any cash payments made in respect
of any item of extraordinary loss accrued during a prior period and added
back to EBITDA in such prior period pursuant to CLAUSE (G)(V) below, plus
(d) to the extent deducted from the calculation of consolidated net income
in CLAUSE (A) above, (i) non-recurring expenses incurred in connection
with the restructuring (including the payment, prepayment, renegotiation,
buyout, or other compromise, collection, or other restructuring
transaction and all expenses related thereto including attorneys' fees and
expenses) of dealer contracts and receivables and (ii) expenses related to
the writeoff of dealer receivables (provided that the aggregate amount of
such expenses that may be added pursuant to this CLAUSE (D)
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<PAGE>
may not exceed $10,000,000 in the aggregate during the term of this
Agreement), plus (e) expenses related to the purchase of accounts from
Paradigm Direct, LLC recognized during such period that, in accordance
with GAAP, are required to be expensed (as opposed to capitalized), plus
(f) expenses related to the internal generation of accounts recognized
during such period that, in accordance with GAAP, are required to be
expensed (as opposed to capitalized), plus (g) the sum of (i) any
provision for income taxes, (ii) Interest Expense, (iii) the amount of
depreciation and amortization for such period, (iv) the amount of any
deduction to consolidated net income as the result of any Stock option
expense, (v) the amount of any item of extraordinary loss not paid in cash
in such period, and (vi) the absolute value of any aggregate net loss
during such period arising from the sale, exchange, or other disposition
of capital assets by such Person (including any fixed assets, whether
tangible or intangible, and all inventory sold in conjunction with the
disposition of fixed assets, but excluding asset sales in the ordinary
course of business permitted pursuant to SECTION 10.11), in each case to
the extent included in the calculation of consolidated net income of such
Person for such period in accordance with GAAP, but without duplication.
In the case of any Permitted Acquisition or internally generated account
during any period of calculation, EBITDA shall, for the purposes of the
foregoing calculations, be adjusted to give effect to such Permitted
Acquisition or internally generated account, as if such Permitted
Acquisition or internally generated account occurred on the first (1st)
day of such period, by, with respect to any Permitted Acquisition,
increasing, if positive, or decreasing, if negative, EBITDA by the EBITDA
of such newly-acquired business during such period of calculation
occurring prior to the date of such Permitted Acquisition.
INTEREST COVERAGE RATIO means, as of any date of determination
thereof, the ratio of (a) the product of (i) Consolidated EBITDA for the
most-recent fiscal quarter ending on or prior to the date of
determination, and (ii) four (4), to (b) Consolidated Interest Expense for
the most-recent four (4) fiscal quarters ending on or prior to the date of
determination; provided, however, for purposes of calculating the Interest
Coverage Ratio, (i) Consolidated Interest Expense shall be adjusted to
give pro forma effect to the reduction in Interest Expense as a result of
the reduction of Indebtedness from the application of the proceeds from
such asset disposition (whether such proceeds are in cash or bonds) as if
such asset disposition and corresponding reduction of Indebtedness
occurred on the first day of such determination period and (ii)
Consolidated EBITDA shall be adjusted to give pro forma effect to such
asset disposition as if such asset disposition had occurred on the first
day of such determination period.
PERMITTED ACQUISITIONS means:
(A) any Dealer Acquisition, including, without limitation, any
Paradigm Acquisition;
(B) any Immaterial Acquisition, provided that the aggregate
consideration with respect to such Immaterial Acquisition, when
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<PAGE>
combined with the aggregate consideration of all other Immaterial
Acquisitions during the twelve (12) month period prior to such Immaterial
Acquisition, does not exceed $10,000,000;
(C) any Acquisition by any Company with respect to which each of the
following requirements shall have been satisfied:
(I) as of the closing of any Acquisition, the Acquisition has
been approved and recommended by the board of directors (or other
equivalent governing body, if any) of the Person to be acquired or from
which such assets or business are to be acquired;
(II) as of the closing of any Acquisition, after giving effect
to such Acquisition, the acquiring party must be Solvent and the
Companies, on a consolidated basis, must be Solvent;
(III) as of the closing of any Acquisition, no Potential
Default or Default shall exist or occur as a result of, and after giving
effect to, such Acquisition;
(IV) as of the closing of any Acquisition, if such Acquisition
is structured as a merger, Borrower, (or if such merger is with any
Subsidiary of Borrower, then such Subsidiary) must be the surviving entity
after giving effect to such merger;
(V) the making and performance of the related acquisition
agreements with respect to such Acquisition, and all other agreements,
documents, and actions required thereunder, will not violate any provision
of any Law, except where such violation could not be a Material Adverse
Event, and will not violate any provisions of the Constituent Documents of
any Company, or constitute a default under any agreement by which any
Company or its respective property may be bound, except where such default
could not be a Material Adverse Event; and
(VI) if such Acquisition is a Material Acquisition,
contemporaneously with the closing of such Material Acquisition, Borrower
shall have delivered to Agent (A) a Permitted Acquisition Compliance
Certificate, demonstrating pro forma compliance with the terms and
conditions of the Loan Documents, after giving effect to the Acquisition,
and (B) any proposed adjustments to the Budget most-recently delivered
pursuant to the terms of this Agreement as a result of such Acquisition;
or
(D) any other Acquisition for which the prior written consent of
Required Lenders has been obtained (and Lenders agree to respond to a
request for consent to any such Acquisition within ten (10) Business Days
following Borrower's request for such consent; provided that the failure
to
4
<PAGE>
provide a response to such request for consent shall be deemed to be a
refusal to grant such consent).
TERMINATION DATE means the earlier of (a) January 2, 2001, and (b)
the effective date of any other termination or cancellation of Lenders'
commitments to lend under, and in accordance with, this Agreement.
(B) SECTION 1.1 is hereby amended to add the following definitions:
"ASSET SALE" means the sale, transfer, or other disposition by any
Company of any of its assets other than any sale, transfer or disposition
of any assets (a) permitted by SUBSECTIONS 10.11(A) THROUGH (G), or (b)
which, when the Net Proceeds thereof are added to the Net Proceeds of any
other sale, transfer or other disposition pursuant to this clause (b),
does not yield Net Proceeds in excess of $2,000,000 in the aggregate.
"INCREASE EFFECTIVE DATE" has the meaning set forth in SECTION
2.5(A).
"INCREASE REQUEST" has the meaning set forth in SECTION 2.5(A).
"NET PROCEEDS" means, with respect to any Asset Sale by any Company,
the amount of cash received by such Company in connection with such
transaction after deducting therefrom the aggregate, without duplication,
of the following amounts to the extent properly attributable to such
transaction: (a) reasonable brokerage commissions, attorneys' fees,
finder's fees, accounting fees, and other similar commissions and fees, in
each case, to the extent paid or payable by such Company; and (b) taxes
paid or payable by such Company to any Governmental Authority as a result
of such transaction.
"PARADIGM ACQUISITION" means the acquisition of contracts or accounts
from Paradigm Direct, LLC.
"REQUESTED AMOUNT" has the meaning set forth in SECTION 2.5(A).
"SECOND AMENDMENT" means the Second Amendment to Credit Agreement
dated effective as of February 29, 2000 among the Borrower, the Lenders
and the Administrative Agent.
"SPECIAL ASSET SALE" means the sale of the outstanding shares of
Protection One UK plc, Protection One International, Inc. and Protection
One Investments, Inc. pursuant to the Agreement.
(C) SECTION 1.1 is hereby amended to delete the definition of
"NATIONSBANK" in its entirety:
(D) SECTION 2.3 is hereby deleted in its entirety and replaced with the
following:
5
<PAGE>
2.3 TERMINATION OF COMMITMENTS.
(A) VOLUNTARY. Without premium or penalty, and upon giving not less
than three (3) Business Days prior telephonic notice (followed by written
notice) to Administrative Agent, Borrower may terminate in whole or in
part the unused portion of the Total Commitment provided that (i) each
partial termination shall be in an amount of not less than $10,000,000 or
a greater integral multiple of $1,000,000; (ii) the amount of the
Commitment Usage may not exceed the Total Commitment (unless Borrowings
are simultaneously paid in an amount equal to such excess); and (iii) each
reduction shall be allocated Pro Rata among Lenders in accordance with
their respective Pro Rata Parts. Promptly after receipt of such notice of
termination or reduction, Administrative Agent shall notify each Lender of
the proposed cancellation or reduction. Such termination or partial
reduction of the Total Commitment shall be effective on the Business Day
specified in Borrower's notice (which date must be at least three (3)
Business Days after Borrower's delivery of such notice). In the event that
the Total Commitment is reduced to zero at a time when there shall be no
Principal Debt, this Agreement shall be terminated to the extent specified
in SECTION 14.14, and all commitment fees and other fees then earned and
unpaid hereunder and all other amounts of the Obligation then due and
owing shall be immediately due and payable, without notice or demand by
Administrative Agent or any Lender.
(B) MANDATORY. The Total Commitment shall automatically terminate in
an amount equal to each mandatory prepayment pursuant to SECTION
3.2(B)(III). The Total Commitment shall be automatically reduced to
$115,000,000 on the date of the mandatory prepayment pursuant to SECTION
3.2(B)(IV). Each termination in the Total Commitment pursuant to this
SECTION 2.3(B) shall be allocated Pro Rata among Lenders in accordance
with their respective Pro Rata Parts.
(E) A new SECTION 2.5 is hereby added as follows:
SECTION 2.5 INCREASE OF COMMITMENTS.
(a) The Borrower shall have the right from time to time to increase
the Total Commitment by an amount of up to $40,000,000 for the purpose of
consummating acquisitions approved by the Administrative Agent in its sole
and absolute discretion, upon a specific date (the "INCREASE EFFECTIVE
DATE") set forth in such request (the "INCREASE REQUEST") upon the same
terms and conditions as set forth herein. Any such increase shall be in
incremental aggregate amounts of not less than $5,000,000 (the "REQUESTED
AMOUNT") and shall increase the amount of the Total Commitments then in
effect and the Committed Sum of each Lender shall be increased by its Pro
Rata Part of the Requested Amount (subject to the Borrower's right to
terminate or reduce the amount of the Commitments pursuant to Section
2.3).
6
<PAGE>
(b) On the Increase Effective Date specified in any Increase Request
(i) each Lender's Committed Sum shall be automatically increased by a Pro
Rata Part of the aggregate amount of the Requested Amount on the Increase
Effective Date therefor, and correspondingly, the Total Commitments, shall
be increased accordingly, in each case without the necessity of further
amendment to this Agreement and (ii) Borrower shall pay to the
Administrative Agent, for the account of the Credit Parties as
Administrative Agent shall determine, an amendment fee in an amount equal
to 3/8% of the Requested Amount on the Increase Effective Date.
(c) Upon the request to the Administrative Agent by any Lender, the
Borrower shall deliver to each such Lender, in exchange for the Note held
by such Lender, a new Note, in the principal amount of such Lender's
Committed Sum after giving effect to the adjustments made pursuant to this
Section 2.5.
(F) SECTION 3.2(B) is hereby deleted in its entirety and replaced with the
following:
(B) MANDATORY PAYMENTS.
(i) The Total Principal Debt is due and payable on the
Termination Date.
(ii) On any date of determination, if the Commitment Usage
exceeds the Total Commitment, then Borrower shall make a
mandatory prepayment of the Principal Debt in the amount of
such excess, together with (i) all accrued and unpaid interest
on the principal amount so prepaid, and (ii) any Consequential
Loss arising as a result thereof.
(iii) Subject in all respects to Section 10.11,
concurrently with the receipt thereof, Borrower shall make a
mandatory prepayment of the Principal Debt in an amount equal
to fifty percent (50%) of the Net Proceeds of each Asset Sale
(other than the Special Asset Sale).
(iv) On the effective date of the Second Amendment,
Borrower shall make a mandatory prepayment of the Principal
Debt in an amount equal to one hundred percent (100%) of the
cash proceeds of the Special Asset Sale.
(v) All mandatory prepayments hereunder shall be applied
Pro Rata.
(G) SECTION 9.3(A)(II) is hereby deleted in its entirety and replaced with
the following:
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<PAGE>
(ii) a Compliance Certificate (other than with respect to the fiscal
year ended December 31, 1999).
(H) The following language shall be added at the end of SECTION 9.3(B)
before the period ".":
(other than with respect to the fiscal quarter ended September 30,
1999)
(I) SECTION 10.9 is hereby deleted in its entirety and replaced with the
following:
10.9 DISTRIBUTIONS AND SUBORDINATED DEBT PAYMENTS.
(A) DISTRIBUTIONS. Borrower shall not, and shall not permit any other
Company to, directly or indirectly declare, make, or pay any
Distributions, other than (i) Distributions declared, made, or paid by any
Company wholly in the form of its capital Stock, and (ii) Distributions by
any Company to Borrower, (iii) Distributions in the form of Common Stock
of POI issued in connection with the conversion of the Convertible Notes,
and (iv) Distributions from any Subsidiary of POI to POI the proceeds of
which:
(A) shall be applied by POI directly to pay out-of-pocket
expenses, for administrative, legal, and accounting services provided
by third parties that are reasonable and customary and incurred in
the ordinary course of business for such professional services, or to
pay franchise fees and similar costs;
(B) will be used to repurchase the Stock of POI in order to
fulfill the obligations of any Company under an employee Stock
purchase plan or similar plan covering employees of any Company as
from time to time in effect;
(C) will be used to pay taxes of the Companies as part of a
consolidated, combined, or unitary tax filing group or of the
separate operations of POI; or
(D) will be used to make investments in, or loans to, any
Subsidiary of POI otherwise permitted pursuant to this Agreement.
(B) SUBORDINATED DEBT. Borrower shall not, and shall not permit any
other Company to pay, prepay, redeem, defease, or repurchase any
Subordinated Debt when it violates the subordination provisions thereof,
provided that so long as no Default exists Borrower may refinance
Subordinated Debt with the proceeds of other Subordinated Debt, provided,
further that notwithstanding the foregoing Borrower shall be permitted to
repurchase Subordinated Debt, in an aggregate amount not to exceed
$50,000,000.
8
<PAGE>
(J) SECTION 10.11 is hereby deleted in its entirety and replaced with the
following:
10.11 SALE OF ASSETS. Borrower shall not, and shall not permit any
other Company to, sell, assign, transfer, or otherwise dispose of any of
its assets, other than (a) sales of inventory and equipment leases
(including, without limitation, equipment leases originated or acquired by
C.E.T., S.A. or its Subsidiaries) in the ordinary course of business, (b)
the sale, discount, or transfer of delinquent accounts receivable in the
ordinary course of business for purposes of collection, (c) sales of
immaterial assets for consideration not less than the fair market value
thereof, (d) dispositions of obsolete assets and assets no longer useful
in the respective businesses of the Companies, (e) transfers resulting
from any casualty or condemnation of property or assets, (f) licenses or
sublicenses of intellectual property and general intangibles and licenses,
leases, or subleases of other property in each case in the ordinary course
of business and that do not materially interfere with the business of any
Company, (g) dispositions permitted by SECTION 10.12, (h) other asset
sales during any fiscal year of the Companies in an aggregate amount not
exceeding ten percent (10%) of the consolidated total assets of the
Companies determined in accordance with GAAP for the most recent fiscal
year (without regard to any write down or write up thereof), and (i) the
Special Asset Sale.
(K) SECTION 10.13 is hereby deleted in its entirety and replaced with the
following:
10.13 FINANCIAL COVENANTS. As calculated on a consolidated basis for
the Companies:
(A) LEVERAGE RATIO. The Administrative Agent and the Lenders hereby
waive compliance with the Leverage Ratio for the fiscal quarters ended
September 30, 1999 and December 31, 1999. Borrower shall not permit the
Leverage Ratio, as of the last day of any fiscal quarter of the Companies
during the following periods, to be greater than the ratio set forth
opposite such period below:
--------------------------------------------------------------------------
PERIOD RATIO
--------------------------------------------------------------------------
January 1, 2000 through December 31, 2000 5.75 to 1.0
--------------------------------------------------------------------------
January 1, 2001 and thereafter 5.50 to 1.0
--------------------------------------------------------------------------
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<PAGE>
(B) INTEREST COVERAGE. The Administrative Agent and the Lenders
hereby waive compliance with the Interest Coverage Ratio for the fiscal
quarters ended September 30, 1999 and December 31, 1999. Borrower shall
not permit the Interest Coverage Ratio, as of the last day of any fiscal
quarter of the Companies during the following periods, to be less than the
ratio set forth opposite such period below:
--------------------------------------------------------------------------
PERIOD RATIO
--------------------------------------------------------------------------
January 1, 2000 through December 31, 2000 2.10 to 1.0
--------------------------------------------------------------------------
January 1, 2001 and thereafter 2.25 to 1.0
--------------------------------------------------------------------------
(L) SECTION 11.6 is hereby deleted in its entirety and replaced with the
following:
11.6 CHANGE OF CONTROL. POI shall cease to own, directly or
indirectly, one hundred percent (100%) of the voting control (directly or
indirectly) of Borrower.
(M) EXHIBIT A-1 is hereby deleted in its entirety and replaced with
EXHIBIT A-1 attached hereto.
(N) SCHEDULE 2.1 is hereby deleted in its entirety and replaced with
SCHEDULE 2.1 attached hereto.
2. AMENDMENT OF CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS. All references
in the Loan Documents to the Credit Agreement shall henceforth include
references to the Credit Agreement as modified and amended by this Amendment,
and as may, from time to time, be further modified, amended, restated, extended,
renewed, and/or increased.
3. RATIFICATIONS. Borrower (a) ratifies and confirms all provisions of the
Loan Documents as amended by this Amendment, (b) ratifies and confirms that all
guaranties, assurances, and Liens, if any, granted, conveyed, or assigned to the
Credit Parties under the Loan Documents are not released, reduced, or otherwise
adversely affected by this Amendment and continue to guarantee, assure, and
secure full payment and performance of the present and future Obligation, and
(c) agrees to perform such acts and duly authorize, execute, acknowledge,
deliver, file, and record such additional documents, and certificates as the
Credit Parties may reasonably request in order to create, perfect, preserve, and
protect those guaranties, assurances, and Liens.
4. REPRESENTATIONS. Borrower represents and warrants to the Credit Parties
that as of the date of this Amendment: (a) this Amendment has been duly
authorized, executed, and delivered by Borrower and each of the other Obligors
that are parties to this Amendment; (b) no action of, or filing with, any
Governmental Authority is required to authorize, or is otherwise required in
connection with, the execution, delivery, and performance by Borrower or any
other Obligor of this Amendment; (c) the Loan
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Documents, as amended by this Amendment, are valid and binding upon Borrower and
the other Obligors and are enforceable against Borrower and the other Obligors
in accordance with their respective terms, except as limited by Debtor Relief
Laws and general principles of equity; (d) the execution, delivery, and
performance by Borrower and the other Obligors of this Amendment do not require
the consent of any other Person and do not and will not constitute a violation
of any Governmental Requirement, order of any Governmental Authority, or
material agreements to which Borrower or any other Obligor is a party thereto or
by which Borrower or any other Obligor is bound; (e) all representations and
warranties in the Loan Documents are true and correct in all material respects
on and as of the date of this Amendment, except to the extent that (i) any of
them speak to a different specific date, or (ii) the facts on which any of them
were based have been changed by transactions contemplated or permitted by the
Credit Agreement; and (f) both before and after giving effect to this Amendment,
no Potential Default or Default exists.
5. CONDITIONS. This Amendment shall not be effective unless and until:
(A) this Amendment has been executed by Borrower, the other Obligors,
Administrative Agent, and the Required Lenders;
(B) If requested by any Lender, Borrower shall have executed and delivered
to Administrative Agent Amended and Restated Notes dated of even date herewith,
and payable to the order of Lenders in the aggregate principal amount of the
Total Commitment;
(C) Borrower shall have delivered to Administrative Agent such documents
satisfactory to Administrative Agent evidencing the authorization and execution
of this Agreement, and the other documents executed and delivered in connection
herewith (including opinions of counsel) (collectively, the "AMENDMENT
DOCUMENTS"); and
(D) Borrower shall have paid to Administrative Agent, for the account of
the Credit Parties as Administrative Agent shall determine, (i) an amendment fee
in an amount equal to 3/8% of the Total Commitment on the effective date of this
Amendment after giving effect to the reductions on the date hereof ($431,250.00)
and (ii) the reasonable fees and expenses of Administrative Agent's counsel
(including the allocated costs of internal counsel) not to exceed $50,000.00.
6. CONTINUED EFFECT. Except to the extent amended hereby or by any
documents executed in connection herewith, all terms, provisions, and conditions
of the Credit Agreement and the other Loan Documents, and all documents executed
in connection therewith, shall continue in full force and effect and shall
remain enforceable and binding in accordance with their respective terms.
7. MISCELLANEOUS. Unless stated otherwise (a) the singular number includes
the plural and vice versa and words of any gender include each other gender, in
each case, as appropriate, (b) headings and captions may not be construed in
interpreting provisions, (c) this Amendment shall be construed -- and its
performance enforced --
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under Texas law, (d) if any part of this Amendment is for any reason found to be
unenforceable, all other portions of it nevertheless remain enforceable, and (e)
this Amendment may be executed in any number of counterparts with the same
effect as if all signatories had signed the same document, and all of those
counterparts must be construed together to constitute the same document.
8. PARTIES. This Amendment binds and inures to Borrower and the Credit
Parties and their respective successors and permitted assigns.
9. ENTIRETIES. THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS
AMENDED BY THIS AMENDMENT AND THE OTHER AMENDMENT DOCUMENTS, REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES ABOUT THE SUBJECT MATTER OF THE CREDIT AGREEMENT
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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SIGNATURE PAGE TO SECOND AMENDMENT OF
CREDIT AGREEMENT AMONG
PROTECTION ONE ALARM MONITORING, INC., AS BORROWER,
WESTAR CAPITAL, INC., AS ADMINISTRATIVE AGENT
AND
THE LENDERS NAMED HEREIN
EXECUTED as of the day and year first above written.
PROTECTION ONE ALARM MONITORING, INC.,
a Delaware corporation, as Borrower
By: /s/ John E. Mack III
---------------------------------------
Name: John E. Mack III
----------------------------------
Title: Chief Executive Officer
----------------------------------
<PAGE>
SIGNATURE PAGE TO SECOND AMENDMENT OF
CREDIT AGREEMENT AMONG
PROTECTION ONE ALARM MONITORING, INC., AS BORROWER,
WESTAR CAPITAL, INC., AS ADMINISTRATIVE AGENT,
AND
THE LENDERS NAMED HEREIN
WESTAR CAPITAL, INC., as Administrative
Agent and a Lender
By: /s/ Cynthia S. Couch
---------------------------------------
Name: Cynthia S. Couch
----------------------------------
Title: Treasurer
----------------------------------
<PAGE>
To induce the Credit Parties to enter into this Amendment, each of the
undersigned (a) consents and agrees to the Amendment Documents' execution and
delivery, (b) ratifies and confirms that all guaranties, assurances, and Liens,
if any, granted, conveyed, or assigned to the Credit Parties under the Loan
Documents are not released, diminished, impaired, reduced, or otherwise
adversely affected by the Amendment Documents and continue to guarantee, assure,
and secure the full payment and performance of all present and future
Obligations (except to the extent specifically limited by the terms of such
guaranties, assurances, or Liens), (c) agrees to perform such acts and duly
authorize, execute, acknowledge, deliver, file, and record such additional
guaranties, assignments, security agreements, deeds of trust, mortgages, and
other agreements, documents, instruments, and certificates as the Credit Parties
may reasonably deem necessary or appropriate in order to create, perfect,
preserve, and protect those guaranties, assurances, and Liens, and (d) waives
notice of acceptance of this consent and agreement, which consent and agreement
binds the undersigned and its successors and permitted assigns and inures to the
Credit Parties and their respective successors and permitted assigns.
PROTECTION ONE, INC., a Delaware corporation
By: /s/ John E. Mack III
---------------------------------------
Name: John E. Mack III
----------------------------------
Title: Chief Executive Officer
----------------------------------
NETWORK MULTI-FAMILY SECURITY CORPORATION,
a Delaware corporation
By: /s/ John E. Mack III
---------------------------------------
Name: John E. Mack III
----------------------------------
Title: Chief Executive Officer
----------------------------------