Purchase
of Stock from Protection One
On February 14, 2003, we purchased
850,000 shares of our common stock and approximately 34,000 shares
of our preferred stock from Protection One for approximately $11.6
million. This transaction was approved by the KCC. The shares of
common stock are being held as treasury stock and the shares of
preferred stock have been retired. This transaction had no effect
on the consolidated financial statements.
Purchases
of Debt Securities
From January 1, 2003 through March
14, 2003 we purchased $35.3 million face value of our putable/callable
notes and $43.0 million face value of our 6.875% senior unsecured
notes in the open market.
Termination
of Plane Lease
During March 2003, we terminated
the lease of an airplane and incurred an expense of $5.9 million
related to this termination.
35. POTENTIAL LIABILITIES TO DAVID C.
WITTIG
AND DOUGLAS T. LAKE
David C. Wittig, our former chairman
of the board, president and chief executive officer, resigned from
all of his positions with us and our affiliates on November 22,
2002. Douglas T. Lake, our executive vice president and chief strategic
officer, was placed on administrative leave from all of his positions
with us and our affiliates on December 6, 2002. In connection with
these actions, we reserved all rights and claims we may have against
Mr. Wittig and Mr. Lake arising under their employment agreements,
any other agreements with us, or any plan, program or policy in
which they participated. In their respective resignation and leave
letters, Mr. Wittig and Mr. Lake stated that they reserved all rights
and claims they may have against us.
During their active employment with
us, we accrued liabilities totaling approximately $27.4 million
for compensation not yet paid to Mr. Wittig and Mr. Lake under various
plans. The compensation includes restricted share unit awards, deferred
vested shares, deferred restricted share unit awards, deferred vested
stock for compensation, executive salary continuation plan benefits
and, in the case of Mr. Wittig, benefits arising from a split dollar
life insurance agreement.
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Additionally, as required by GAAP, we
have made provisions in our financial statements for an additional
amount of approximately $22.9 million should it later be determined
that we are obligated to pay Mr. Wittig and Mr. Lake any amounts
under their employment agreements. We do not concede, however, that
any amounts are owed to Mr. Wittig or Mr. Lake, and we believe that
we may have potential claims and defenses against Mr. Wittig and
Mr. Lake. The compensation could include a pro rata portion of their
unpaid bonuses for the year in which termination occurred, unused
vacation, accumulated sick leave, severance, restricted share unit
awards and related dividend equivalents, and increased executive
salary continuation plan benefits. We believe the amount reserved
adequately provides for potential obligations to Mr. Wittig and
Mr. Lake.
In addition to these amounts, we could
also be obligated to record additional expense each year in which
payments are made to Mr. Wittig and Mr. Lake pursuant to the executive
salary continuation plan. Assuming an expected payout period of
35 years, the aggregate nominal amount of these expenses would be
approximately $17.9 million for Mr. Wittig and $9.0 million for
Mr. Lake. Also, if stock performance requirements for some restricted
share unit awards were to be satisfied, we would be required to
record additional compensation expense of approximately $4.4 million
to Mr. Wittig and Mr. Lake.
As of March 31, 2003, neither Mr. Wittig
nor Mr. Lake has asserted any rights or claims against us for any
of the amounts described above. We are unable to predict whether
they will assert any rights or claims in the future. If they did
so, we will vigorously defend against such claims and potentially
assert counterclaims; however, the ultimate resolution of these
matters is outside our control.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective May 30, 2002, the Audit and
Finance Committee of our board of directors decided not to engage
Arthur Andersen LLP (Andersen) as our public accountants and engaged
Deloitte & Touche LLP (Deloitte & Touche) to serve as our principal
accountants for fiscal year 2002. This matter was previously reported
by us on our Form 8-K dated May 30, 2002 filed with the SEC.
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