SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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[ ] Preliminary Proxy Statement
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(as permitted by Rule 14a-6(e) (2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Alarmguard Holdings, Inc.
(Name of Registrant as Specified In Its Charter)
Alarmguard Holdings, Inc.
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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<PAGE>
ALARMGUARD HOLDINGS, INC.
125 FRONTAGE ROAD
ORANGE, CT 06477
(203) 795-9000
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 30, 1998
The Annual Meeting of Stockholders of Alarmguard Holdings, Inc.
(the "Company") will be held at the offices of the Company at 125
Frontage Road, Orange, Connecticut on Tuesday, June 30, 1998, at
9:00 a.m. local time for the following purposes:
(1) To ratify the sale of 35,700 shares of Series A
Convertible Preferred Stock at $1,000 per share and 5,000
shares of Series B Convertible Preferred Stock at $1,000
per share, consummated on February 2 and 13, 1998;
(2) To elect two Class I Directors to serve for a term of
three years; and
(3) To act upon such other matters as may properly come
before the meeting or any reconvened meeting following
any adjournment thereof.
The Board of Directors has fixed the close of business on April 30,
1998 as the record date for the determination of stockholders
entitled to notice of and to vote at the meeting.
The Annual Meeting of Stockholders may be adjourned from time to
time without notice other than announcement at the Annual Meeting,
and any business for which notice of the Annual Meeting is hereby
given may be transacted at a reconvened meeting following such
adjournment.
We urge you to sign and date the enclosed proxy card and return it
promptly in the enclosed envelope. In the event you are able to
attend the meeting, you may revoke your proxy and vote your shares
in person.
By Order of the Board of Directors
/s/ Russell R. MacDonnell
----------------------------------
RUSSELL R. MacDONNELL
Chairman, Chief Executive Officer
and President
Orange, CT
April 30, 1998
<PAGE>
ALARMGUARD HOLDINGS, INC.
125 FRONTAGE ROAD
ORANGE, CT 06477
PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 30, 1998
This proxy solicitation is made by the Board of Directors of
Alarmguard Holdings, Inc. (the "Company"). By signing and returning
the enclosed proxy card, you authorize the representatives of the
Board of Directors named on it to represent you and vote your
shares.
If you attend the Annual Meeting, you may vote by ballot. If you
are not present at the Annual Meeting, your shares can be voted
only when represented by proxy. You may indicate a vote for or
against each proposal on the proxy card and your shares will be
voted accordingly. If you indicate a preference to abstain on any
proposal, no vote will be recorded. You may withhold your vote for
any nominee for director by writing his name in the appropriate
space on the proxy card. You may cancel your proxy before balloting
begins by notifying the Corporate Secretary in writing at 125
Frontage Road, Orange, CT 06477. In addition, you may revoke any
proxy signed and returned by you at any time before it is voted by
signing and duly delivering a new proxy bearing a later date or by
attending the meeting and voting in person. If you return a signed
proxy card that does not indicate your voting preferences, the
proxy holders will vote your shares for the listed matters and in
their discretion on any other matters that properly come before the
meeting.
The cost of soliciting proxies will be borne by the Company. In
addition to solicitation by mail, proxy solicitations may also be
made personally or by telephone or telegram by directors or
officers of the Company, as yet undesignated, without added
compensation. The Company will reimburse brokers, custodians and
nominees for their expenses in sending proxies and proxy materials
to beneficial owners.
Only stockholders of record as of the close of business on April
30, 1998 will be entitled to notice of and to vote at the Annual
Meeting of Stockholders. As of April 30, 1998, the Company had
outstanding 5,593,948 shares of its common stock, par value $0.0001
per share (the "Common Stock"), held of record by approximately
1,182 holders. Each share of Common Stock is entitled to one vote.
In addition, the Company had outstanding 35,700 shares of Series A
Preferred Stock ("Series A Preferred Stock") and 5,000 shares of
Series B Preferred Stock ("Series B. Preferred Stock") held by a
total of 18 stockholders of record. Each share of Preferred Stock
is entitled to one vote for each share of Common Stock issuable
upon conversion of the Preferred Stock. Accordingly, each share of
Series A Preferred Stock is entitled to 121.21 votes and each share
of Series B Preferred Stock is entitled to 129.03 votes.
Abstentions and broker non-votes are counted for purposes of
determining the number of shares represented at the Annual Meeting,
but are deemed not to have voted on the proposals. Broker non-votes
occur when a broker nominee, holding shares in street name for the
beneficial owner thereof, has not received voting instructions from
the beneficial owner and does not have discretionary authority to
vote. Each proposal requires the affirmative vote of a majority of
the shares of Common Stock present in person or represented by
proxy and voting. Accordingly, abstentions, broker non-votes or the
failure to either return a proxy or to attend the Annual Meeting
will be deemed not to have voted on the proposals.
The officers and directors of the Company will vote the shares of
Common Stock beneficially owned or controlled by them (representing
approximately 37.9% of the votes to be cast by the holders of
shares of Common Stock and Preferred Stock issued and outstanding
and approximately 32.2% of the votes to be cast by the holders of
shares of Common Stock issued and outstanding) in favor of each of
the proposals.
This proxy statement and form of proxy are first being sent to
stockholders on or about May 1, 1998. The Company's 1997 Annual
Report to Stockholders is being distributed along with this proxy
statement to all stockholders of record as of the record date of
the Annual Meeting of Stockholders and should be read in
conjunction with the matters set forth herein.
1. Ratification of the sale of 35,700 shares of Series A Preferred
Stock at $1,000 per share and 5,000 shares of Series B Preferred
Stock at $1,000 per share.
On February 2 and 13, 1998, the Company completed an offering of
40,000 shares of Convertible Preferred Stock (35,000 shares of
Series A Preferred Stock and 5,000 shares of Series B Preferred
Stock) at $1,000 per share yielding gross proceeds totaling $40
million. As part of the offering, the Company issued 700 additional
shares of the Series A Preferred Stock in exchange for $700,000 of
the Company's subordinated debt. Of these shares, Russell R.
MacDonnell, Chairman, Chief Executive Officer and President of the
Company received 125 shares and David Heidecorn, Executive Vice
President and Chief Financial Officer, received 75 shares.
Each share of Series A Preferred Stock pays current quarterly
dividends of $50 per annum. Each holder of the Series A Preferred
Stock and Series B Preferred Stock has the right to convert shares,
at the option of the holder, at any time into shares of the
Company's Common Stock at the conversion price of $8.25 per share
and $7.75 per share, respectively, subject to certain anti-dilution
provisions. At the initial date of issuance, the market value of
the Common Stock of the Company was $10.00 per share. The Series A
Preferred Stock and Series B Preferred Stock also rank prior to all
other classes of equity securities of the Company, including the
Common Stock, as to dividends and distribution of assets upon
liquidation, dissolution or winding up of the Company. The holders
of the newly issued Preferred Stock have the right to elect two
members to the Company's expanded Board of Directors. Holders of
shares of Series A Preferred Stock and Series B Preferred Stock
also have the right to vote in all matters submitted to a vote of
stockholders of the Company, with each share being entitled to cast
that number of votes equal to the number of shares of Common Stock
into which the Series A Preferred Stock or Series B Preferred Stock
is convertible. Accordingly, the holders of Series A Preferred
Stock and Series B Preferred Stock will be entitled to cast
4,972,434 votes for the election of directors at the Annual
Meeting, which equals 47.1% of the votes entitled to be cast at the
Meeting.
Concurrent with the offering, the Company increased its credit
facility from $60 million to $90 million. The proceeds from the
offering of the Series A Preferred Stock and the Series B Preferred
Stock and borrowings from the expanded credit facility have been
and are intended to continue to be used to finance acquisitions and
expand the Company's Direct Marketing and Dealer Programs.
If all of the shares of Series A Preferred Stock and Series B
Preferred Stock were converted into Common Stock of the Company,
the holders of the Convertible Preferred Stock would, collectively,
own approximately 47.1% of the Common Stock of the Company. Under
the rules of the American Stock Exchange ("Amex"), stockholder
approval is required for the sale or issuance by the Company of
Common Stock (or securities convertible into Common Stock) equal to
20% or more of presently outstanding stock for less than the
greater of book or market value of the Common Stock. Because the
conversion of the Series A Stock and Series B Stock could result in
the issuance of shares of Common Stock in excess of 20% of the
number of shares of Common Stock outstanding before such conversion
for a price less than the greater of book or market value of such
Common Stock, the Company seeks the approval of such issuance in
order to comply with the Amex standards.
The Amex standards also require stockholder approval for
transactions deemed to constitute a "change in control." Although
the Company does not believe that the issuance of the Series A
Preferred Stock and Series B Preferred Stock or the issuance of the
Common Stock upon conversion of the Series A Preferred Stock and
Series B Preferred Stock constitutes a "change in control", if the
transactions were to be so construed, the approval sought hereby
would also be effective to satisfy the stockholder vote require
thereby.
The issuance of Common Stock upon the conversion of the Series A
Preferred Stock and Series B Preferred Stock will have no effect on
the rights or privileges of existing holders of Common Stock except
that the economic interests of each stockholder will be diluted as
a result of such issuance. Further, prior to conversion, holders of
Series A Preferred Stock will be entitled to receive dividends and
holders of Series A Preferred Stock and Series B Preferred Stock
will be entitled to receive distributions upon a liquidation of the
Company in preference to claims of holders of the Common Stock.
Accordingly, the Company is seeking ratification by holders of
Common Stock of the sale of the Convertible Preferred Stock at this
meeting of stockholders. In the event that the stockholders do not
ratify the transaction described above, the Common Stock of the
Company could become subject to possible delisting from trading by
the Amex, which management of the Company believes would not be in
the best interest of the Company's stockholders.
This proposal will be determined solely by the holders of Common
Stock. Shares of Series A Preferred Stock and Series B Preferred
Stock will not be entitled to vote on this proposal.
The Board of Directors recommends a vote FOR the proposal set forth
above.
2. Election of Directors
Directors Standing for Election
The Board of Directors is currently divided into three classes. The
term of office of Directors in Class I expires at the 1998 annual
meeting. Class II Directors serve for a two-year term and such term
will expire at the 1999 annual meeting. Class III Directors serve
for a three-year term and such term will expire at the year 2000
annual meeting. The Board of Directors proposes that the nominees
described below, each of whom are currently serving as Class I
directors, be re-elected to Class I for a new term of three years
or until their successors are duly elected and qualified.
Each of the nominees has consented to serve a three-year term. If
either of them should become unavailable to serve as a director,
the Board may designate a substitute nominee. In that case, the
persons named as proxies will vote for the substitute nominee
designated by the Board.
The following table sets forth the age and title of each nominee
director and each director continuing in office. Also set forth
below are descriptions of such person's additional business
experience during the past five years.
Nominees for Election as Class I Directors
Name Age Position
- -------------------------------------------------------------------
David Heidecorn 41 Executive Vice President, Chief
Financial Officer and Director
Thomas W. Janes 42 Director
- -------------------------------------------------------------------
Directors Whose Terms Have Not Expired
Name Age Position
- -------------------------------------------------------------------
Russell R. 50 Chairman, Chief Executive Officer and
MacDonnell President
Stuart L. Bell 44 Director
Michael E. Cahr 58 Director
Michael M. Earley 42 Director
Stephen L. Green 47 Director
Timothy A. Holt 45 Director
Jeffrey T. Leeds 42 Director
- ------------------------------------------------------------------
Class I Directors. The directors standing for election are:
David Heidecorn
David Heidecorn serves as Executive Vice President, Chief Financial
Officer and a director of the Company. Mr. Heidecorn is one of the
founding investors in the Company. In 1984, Mr. Heidecorn joined
General Electric Company in the International Sector. From 1986 to
1992, Mr. Heidecorn was employed by GE Capital Corporation as a
Vice President in the Leveraged Finance Group and a Senior Vice
President for the Corporate Finance Group, where he led the
Bankruptcy and Reorganization Finance activity for the Northeast.
He received his B.A. in Economics from Lehigh University and his
M.B.A. in Finance from Columbia University.
Thomas W. Janes
Thomas W. Janes serves as Managing Director of Triumph Capital
Group, Inc., ("Triumph Capital"), a private equity money management
firm which, through its affiliates, manages Triumph Partners III,
L.P., Triumph-California Limited Partnership and Triumph-
Connecticut Limited Partnership, of which Mr. Janes is a general
partner. He has been affiliated with Triumph Capital since 1990.
Mr. Janes also serves as a director of Ascent Pediatrics, Inc. and
Dairy Mart Convenience Stores, Inc.
The Board of Directors recommends a vote FOR the nominees set forth
above.
Class II Directors. The following Class II directors' terms will
expire at the 1999 annual meeting:
Michael E. Cahr
Michael E. Cahr serves as Chairman of Allscripts, Inc., a privately-
owned company engaged in providing medication management solutions
through the use of technology. He has served in this position since
1994 and also served as President and Chief Executive Officer until
October 1997. He served as a Venture Group Manager for Allstate
Venture Capital, a division of Allstate Insurance Company, between
1987 and June 1994. He served as a director of Triton Group Ltd.,
from June 1993 to April 1997 and is also a director of LifeCell
Corporation and Optek Technologies, Inc.
Stephen L. Green
Stephen L. Green is general partner of Canaan Partners, a venture
capital fund located in Rowayton, Connecticut. Prior to joining
Canaan Partners in November 1991, he served as Managing Director in
GE Capital's Corporate Finance Group for more than five years. Mr.
Green also serves as director for the following public companies:
Chartwell RE Corporation; Suiza Foods Corporation; and Advance
Paradigm Inc.
Class III Directors. The following Class III directors' terms will
expire at the 2000 annual meeting:
Russell R. MacDonnell
Russell R. MacDonnell serves as the Chief Executive Officer and
Chairman of the Board of Directors of the Company. From 1973 to
1985, Mr. MacDonnell served as President of Sonitrol Security
Systems ("Sonitrol Security") which was the Northeast distributor
for Sonitrol Corporation. From July 1986 to May 1991, Mr.
MacDonnell served as Chairman and Chief Executive Officer of
SecurityLink Corporation, which provided security alarm services
and equipment in the Northeast, Midwest, Mid-Atlantic and Southeast
regions. In December 1991, Mr. MacDonnell founded the Company. Mr.
MacDonnell is a member of the Fairchester Chapter of Young
Presidents Organization, the American Society for Industrial
Security, the National Burglar and Fire Alarm Association, as well
as various other security alarm industry organizations. Mr.
MacDonnell received a B.A. from Williams College in 1970 and a J.D.
from Boston University School of Law in 1973.
Stuart L. Bell
Stuart L. Bell served as the Executive Vice President and Chief
Financial Officer of CUC International from 1983 to January 1995
and is the Vice Chairman of Interval. Mr. Bell also serves as
director of Harbinger Corp. and International Telecommunication
Data Systems, Inc. and the Chairman of Innovative Medical Research,
Inc.
Michael M. Earley
Michael M. Earley serves as President of Triton Group Management,
Inc., a management consulting firm. He served as President and
Chief Executive Officer of Triton Group Ltd., from February 1996 to
April 1997 and as a director since June 1993. Mr. Earley served as
President and Chief Operating Officer (June 1994 to January 1996)
and Senior Vice President and Chief Financial Officer of Triton and
Intermark, Inc. (1991 to 1994). He is also a director of Ridgewood
Hotels, Inc.
Directors Nominated by Preferred Stockholders:
Timothy A. Holt
Mr. Holt has been Chief Investment Officer for Aetna Inc. since
September 1997. Mr. Holt has been employed by Aetna since 1977 in a
variety of positions, including Senior Vice President and Chief
Financial Officer for Aetna Retirement Services beginning in
January 1996 and prior to that as Vice President, Portfolio
Management Group.
Jeffrey T. Leeds
Mr. Leeds has been a principal of Advance Capital Management, LLC,
a private equity firm located in New York, since 1995. Mr. Leeds is
also President and co-founder of Leeds Group Inc., a New York
private investment banking firm founded in 1993. From 1986 to 1993,
Mr. Leeds worked in the investment banking firm of Lazard Freres &
Co. Mr. Leeds presently serves on the boards of The Edison Project,
Elsinore Corporation and The World Resources Institute.
Executive Officers of the Registrant
The following table provides certain information about the
Company's current Executive Officers not serving as directors of
the Company:
Name Age Position
- -------------------------------------------------------------------
Gregory J. 48 Vice President of the Company and
Westhoff President and Chief Operating Officer
of Alarmguard, Inc.
Joseph J. 47 Vice President, Sales and Marketing
Monachino of Alarmguard, Inc.
Peter M. Rogers 44 Vice President, Operations of
Alarmguard, Inc.
Gregory J. Westhoff serves as Vice President of the Company and
President and Chief Operating Officer of Alarmguard, Inc. Mr.
Westhoff was the Vice President, Mid-Atlantic Region, and Chief
Operating Officer of SecurityLink Corporation, where he served from
December 1989 until May 1992 in Philadelphia, Pennsylvania. Prior
to joining SecurityLink Corporation, Mr. Westhoff was Eastern
Regional Manager of Westec Security in Philadelphia from 1988 to
1989. From 1985 to 1988, Mr. Westhoff was District Manager of
Rollins Protective Services and General Manager for Warner Amex
Security Systems from 1981 to 1985. Mr. Westhoff was General
Manager for American Alarm from 1976 to 1981 and District Manager
for Westinghouse Security System from 1969 to 1976. Mr. Westhoff
graduated from Edinboro University of Pennsylvania in 1969.
Joseph J. Monachino serves as Vice President, Sales and Marketing
of Alarmguard, Inc. Mr. Monachino joined Alarmguard, Inc. in July
1994 to manage its sales and marketing functions. Prior to joining
Alarmguard, Inc., Mr. Monachino formed his own marketing consulting
group located in Westport, Connecticut serving clients including
Holmes Protection Group, LTD and Dictograph Franchise Corporation.
Mr. Monachino also served as Vice President of Marketing for
SecurityLink Corporation from 1987 to 1991. Mr. Monachino earned
his B.A. from Franklin College in 1973 and a Masters of Divinity
from Yale University in 1976.
Peter M. Rogers serves as Vice President, Operations, of
Alarmguard, Inc. Mr. Rogers joined Alarmguard, Inc. in November of
1994 to direct Alarmguard's MIS, telecommunications, purchasing and
inventory, training and standards/procedures areas. Mr. Rogers
served as Vice President of Operations with SecurityLink
Corporation from 1989 to 1991. Mr. Rogers served as Eastern
Regional Manager with Eddie Bauer from 1981 to 1984, Beekly
Corporation as Vice President Operations from 1984 to 1989, and
Windsor Marketing Group as Vice President of Sales from 1991 to
1994. Mr. Rogers earned his B.A. from Harvard University in 1976
and his M.B.A. from Rensselaer Polytechnic Institute in 1990.
Meetings and Certain Committees of the Directors
The Board of Directors held four regular meetings and four
telephonic meetings during 1997. All directors attended at least
75% of the total number of meetings of the Board of Directors and
all committees of the Board of Directors on which they served.
The Board of Directors has delegated certain functions to the
following standing committees:
The Audit Committee recommends to the Board of Directors the
engagement of the independent auditors of the Company and reviews
with the independent auditors the scope and results of the
Company's audits, the Company's internal accounting controls, and
the professional services furnished by the independent auditors of
the Company. The Audit Committee held one meeting during 1997. The
current members of the Audit Committee are Messrs. Bell and Earley.
The Compensation Committee's functions are to review, approve,
recommend and report to the Chief Executive Officer and the Board
of Directors matters specifically relating to the compensation of
the Company's Chief Executive Officer and other key executives. The
committee held no meetings during 1997, but did meet in March, 1998
to review the total compensation for the operating management of
the Company. The current members of the Compensation Committee are
Messrs. Bell, Cahr and Green.
The Company does not have a nominating committee of its Board of
Directors.
Compensation of Directors
In 1997, each director of the Company who was not employed by the
Company received $1,000 for each meeting attended in person or a
committee thereof. Directors are also reimbursed for their out of
pocket expenses in attending meetings for the Company.
Directors who are not employees of the Company also received
options to purchase shares of the Company's Common Stock as
follows:
(1) Each director of the Company who was first elected or
appointed a director at the time of the merger with
Triton Group Ltd. on April 15, 1997, received a non-
discretionary automatic grant of non-qualified ten-year
stock options for the purchase of 10,000 shares of the
Company's Common Stock at an exercise price of $7.50, the
value of the Common Stock at date of grant. Options
granted vest ratably over a three-year period.
(2) Thereafter as of the day after the Annual Meeting of
Stockholders of the Company to be held in calendar years
1998 and 1999, each non-employee Director will receive
additional non-discretionary automatic grants of non-
qualified stock options for the purchase of 10,000 shares
of the Company's Common Stock in each such year. The
exercise price of each share of the Company's Common
Stock subject to any eligible Director's option will be
equal to the fair market value of a share of the
Company's Common Stock on the date such option is
granted.
Certain Transactions
Prior to April 15, 1997, Triumph Capital and BF Partners held
debentures issued by the Company (the "Old Debentures") in the
principal amounts of $2,014,800 and $99,000 respectively. Stuart L.
Bell, a member of the Company's Board, is a general partner of BF
Partners and Thomas W. Janes, a member of the Company's Board, is a
managing director of Triumph Capital.
Pursuant to the terms of the Old Debentures, Alarmguard paid
interest to each Subordinated Debt Holder at the rate of 10% per
annum through April 15, 1997 and the Old Debentures were to be
redeemed at par by March 31, 1998. On April 15, 1997, in connection
with the consummation of the Merger with Triton Group Ltd. (the
"Merger"), the Company refinanced the Old Debentures with newly
issued subordinated debentures (the "New Debentures"). The Old
Debentures held by Triumph Capital were redeemed at par. The Old
Debentures of BF Partners were exchanged for New Debentures and BF
Partners purchased additional New Debentures in the principal
amount of $301,000. The New Debentures bear interest at 15% per
annum. In addition, the Company issued warrants to each of the
former holders of Old Debentures to purchase an aggregate of
215,939 shares of Common Stock at an exercise price of $11.11 per
share. Russell R. MacDonnell and David Heidecorn received $125,000
and $75,000 in New Debentures as well as a pro rata share of the
Warrants. The New Debentures were paid to Messrs. MacDonnell and
Heidecorn in lieu of cash bonus compensation.
The Company paid Triton Group Management, Inc., an entity in which
Mr. Earley, a Director of the Company, is the President and 50%
stockholder, $140,000 during 1997 for management consulting
services in connection with the disposition of certain assets of
the Company and in connection with operating as a public company.
On July 1, 1993, the Company entered into a lease with respect to
the Company's executive offices, central monitoring station and
administrative headquarters located at 125 Frontage Road, Orange
Connecticut, with 125 Frontage Road LLC, a company controlled by
Russell R. MacDonnell, Chairman, Chief Executive Officer and
President of the Company. This lease expires on June 30, 2005 and
provides for monthly rent payments of $27,000 per month for an
aggregate of $324,000 per year. The Company believes that the lease
is on terms no less favorable than are available from an
unaffiliated third party.
The wife of Russell R. MacDonnell owns a controlling interest in
Rapid Response ("Rapid Response"), a company that performs
wholesale security alarm monitoring services. In connection with
the Company's acquisition program, the Company from time to time
purchases subscriber accounts from sellers which utilize the
service of Rapid Response pursuant to contracts that pre-date such
acquisitions. The Company allows such contracts to be completed
before integrating the subscribers into the Company's monitoring
services. The Company paid Rapid Response $73,000 in 1997. The
Company believes that the transactions with Rapid Response are on
terms no less favorable than are available from unaffiliated third
parties.
Ownership of Company Stock by Certain Holders, Directors and
Officers
The following table sets forth, as of the close of business on
April 30, 1998, information as to the ownership of the Company's
Common Stock, including (i) those stockholders known to the Company
to be the beneficial owners of more than 5% of the outstanding
shares of the Company's Common Stock (based solely upon filings by
each of such stockholders with the Securities and Exchange
Commission (the "Commission"), on Schedule 13D or Schedule 13G),
and (ii) each director and the nominees for director, (iii) each of
the executive officers named in the Summary Compensation Table and
(iv) the directors and all executive officers as a group.
Shares Percent
Beneficial Owner Beneficially Owned of Class
- -------------------------------------------------------------------
Canaan Entities(1) 1,438,264 23.05%
105 Rowayton Avenue
Rowayton, CT 06853
OZ Management, L.L.C. (2) 1,121,212 16.70%
153 E. 53rd Street, 44th Floor
New York, NY 10022
Triumph-Connecticut Limited 767,554 13.72%
Partnership
60 State Street, 21st Floor
Boston, MA 02109
Advance Capital Partners, L.P. (3) 878,787 13.58%
Advance Capital Offshore Partners,
L.P.
660 Madison Avenue, 15th Floor
New York, NY 10021
Elliott Associates L.P. (4) 484,848 7.98%
712 Fifth Avenue, 36th Floor
New York, NY 10019
Ryback Management Corporation (5) 369,430 6.60%
7711 Carondelet Ave.
Box 16900
St. Louis, MO 63105
The Capital Group Companies, Inc. (6) 360,000 6.44%
333 South Hope Street
Los Angeles, CA 90071
Lehman Brothers Capital Partners III, 606,061 9.78%
L.P. (7)
c/o Lehman Brothers
Three World Financial Center
New York, NY 10285
Aetna Life Insurance Company (8) 606,061 9.78%
151 Farmington Avenue
Hartford, CT 06516
Exeter Capital Partners IV, L.P. (9) 303,030 5.14%
10 East 53rd Street
New York, NY 10022
Russell R. MacDonnell (10) 144,550 2.56%
David Heidecorn (11) 71,708 1.27%
Stuart L. Bell (12) 125,719 2.22%
Michael E. Cahr (13) 10,833 *
Michael M. Earley (14) 43,453 *
Stephen L. Green (15) 1,438,264 23.05%
Thomas W. Janes (16) 767,554 13.72%
Joseph J. Monachino (17) 8,830 *
Peter M. Rogers (18) 4,552 *
Gregory J. Westhoff (19) 37,969 *
Jeffrey T. Leeds (20) 878,787 13.58%
Timothy A. Holt (21) 606,061 9.78%
Directors and Executive Officers 4,138,280 52.19%
as a Group
(12 persons) (22)
- -------------------------------------------------------------------
*Less than 1%
(1) Shares indicated as beneficially owned by Canaan include
231,014 shares beneficially owned by Canaan Venture Limited
Partnership and 562,089 shares beneficially owned by Canaan
Venture Offshore Limited Partnership. Each of the Canaan
entities has sole voting power with respect to its shares.
Shares indicated as beneficially owned by Canaan include
shares issuable upon the conversion of 5,000 shares of Series
B Preferred Stock.
(2) Issuable upon the conversion of 9,250 shares of Series A
Preferred Stock.
(3) Issuable upon the conversion of 7,250 shares of Series A
Preferred Stock.
(4) Issuable upon the conversion of 4,000 shares of Series A
Preferred Stock.
(5) Includes 369,430 shares beneficially owned by Lindner Growth
Fund. Ryback has sole voting and dispositive power over all of
such shares.
(6) Includes The Capital Group Companies, Inc., Capital Research
and Management Company and SMALLCAP World Fund, Inc.
(7) Issuable upon the conversion of 5,000 shares of Series A
Preferred Stock.
(8) Issuable upon the conversion of 5,000 shares of Series A
Preferred Stock.
(9) Issuable upon the conversion of 2,500 shares of Series A
Preferred Stock.
(10) Includes 15,152 shares of Common Stock issuable upon the
conversion of 125 shares of Series A Preferred Stock, 5,868
shares of Common Stock issuable upon the exercise of Warrants
and options exercisable within 60 days to purchase 42,773
shares of Common Stock.
(11) Includes 9,091 shares of Common Stock issuable upon the
conversion of 75 shares of Series A Preferred Stock, 3,521
shares of Common Stock issuable upon the exercise of Warrants
and options exercisable within 60 days to purchase 23,886
shares of Common Stock.
(12) Includes 9,200 shares held by Mr. Bell as custodian for the
benefit of his three minor children and 6,105 shares held by
BF Partners, of which Mr. Bell is a partner. Mr. Bell has sole
voting power with respect to such 6,105 shares. Also includes
48,484 shares of Common Stock issuable upon the conversion of
400 shares of Series A Preferred Stock, 18,777 shares of
Common Stock issuable upon the exercise of Warrants and
options exercisable within 60 days to purchase 3,333 shares of
Common Stock.
(13) Includes options exercisable within 60 days to purchase 3,333
shares of Common Stock.
(14) Includes 120 shares held by Mr. Earley's spouse and options
exercisable within 60 days to purchase 3,333 shares of Common
Stock.
(15) Mr. Green is a general partner of various venture capital
investment funds that may be deemed to be affiliated with the
Canaan entities, and thus, under the rules and regulations of
the Commission, may be deemed to be the beneficial owner of
the shares of the Company's Common Stock owned by those funds.
Accordingly, such shares are included in the table as
beneficially owned by Mr. Green. Mr. Green is not a general
partner of the Canaan entities, and has no voting power with
respect to such shares. Mr. Green disclaims beneficial
ownership of such shares.
(16) Mr. Janes is a general partner of Triumph, and thus, under the
rules and regulation of the Commission, may be deemed to be
the beneficial owner of Triumph's Common Stock. Accordingly,
such shares are included in the table as beneficially owned by
Mr. Janes. Triumph has sole voting power with respect to such
shares. Mr. Janes disclaims beneficial ownership of such
shares.
(17) Includes options exercisable within 60 days to purchase 8,830
shares of Common Stock.
(18) Includes options exercisable within 60 days to purchase 4,552
shares of Common Stock.
(19) Includes options exercisable within 60 days to purchase 14,968
shares of Common Stock.
(20) Issuable upon the conversion of 5,000 shares of Series A
Preferred Stock beneficially owned by Advance Capital
Management ("Advance"). Mr. Leeds is the founder and principal
of Advance, and thus, under the rules and regulations of the
Commission, may be deemed to be the beneficial owner of such
shares. Accordingly, such shares are included in the table as
beneficially owned by Mr. Leeds. Mr. Leeds disclaims
beneficial ownership of such shares.
(21) Issuable upon the conversion of 5,000 shares of Series A
Preferred Stock beneficially owned by Aetna Life Insurance Co.
("Aetna"). Mr. Holt is the Chief Investment Officer of Aetna,
and thus, under the rules and regulations of the Commission,
may be deemed to be the beneficial owner of such shares.
Accordingly, such shares are included in the table as
beneficially owned by Mr. Holt. Mr. Holt disclaims beneficial
ownership of such shares.
(22) Includes 105,008 shares issuable upon exercise of options and
2,202,736 shares issuable upon conversion of Series A
Preferred Stock and Series B Preferred Stock.
Executive Compensation and Other Information
The following table shows the cash compensation paid by the Company
and its subsidiaries as well as certain other compensation paid or
accrued in 1996 and 1997 to the Chairman of the Board and Chief
Executive Officer of the Company, and the four most highly
compensated Executive Officers of the Company. The Executives of
the Company were not executives of the predecessor company, and as
such their 1995 compensation is not included below.
Summary Compensation Table
Long Term
Compensation
------------
Securities
Annual Compensation Underlying All Other
------------------- Options Compensation
Year Salary Bonus(1) (#)(2) (1)(4)
- --------------------------------------------------------------------------------
Russell R. MacDonnell 1997 $275,000 $90,000 110,000 $81,254(3)(5)
Chairman, President and 1996 271,882 67,500 0 1,758
Chief Executive Officer
David Heidecorn 1997 200,000 65,000 65,000 51,780(3)
Executive Vice President 1996 193,349 57,500 0 1,349
and Chief Financial
Officer
Gregory J. Westhoff 1997 150,000 65,000 40,000 1,348
Vice President and 1996 140,835 40,000 0 1,016
President of Alarmguard,
Inc.
Joseph J. Monachino 1997 121,000 15,000 16,000 2,219
Vice President, Sales 1996 120,069 15,000 0 1,593
and Marketing of
Alarmguard, Inc.
Peter M. Rogers 1997 100,000 30,000 16,000 1,719
Vice President, 1996 95,000 20,000 0 1,356
Operations of
Alarmguard, Inc.
- --------------------------------------------------------------------------------
(1) Of the compensation reported as Bonus and All Other
Compensation in 1997 for Messrs. MacDonnell and Heidecorn,
$125,000 and $75,000, respectively, was paid in the form of
New Debentures. See "Certain Transactions."
(2) Number of shares of Common Stock underlying options granted on
April 16, 1997.
(3) Includes special one time bonuses in 1997 provided to Messrs.
MacDonnell and Heidecorn in connection with the merger with
Triton Group Ltd.
(4) Other compensation consists of contributions by the Company on
behalf of each of the named individuals in connection with the
Company's 401(k) Savings Plan.
(5) Includes $3,773 of life insurance premiums paid by the
Company.
Stock Options
The following table sets forth certain information regarding stock
options granted in 1997 to the five individuals named in the
Summary Compensation Table. In addition, in accordance with the
Commission's rules, the table also shows a hypothetical potential
realizable value of such options based on assumed rates of annual
compounded stock price appreciation of 5% and 10% from the date the
options were granted over the full option term. The assumed rates
of growth were selected by the Commission for illustration purposes
only, and are not intended to predict future stock prices, which
will depend upon market conditions and the Company's future
performance and prospects.
Option Grant in Last Fiscal Year (1997)
Potential Realizable
Percent Value at Assumed
of Total Annual Rates of Stock
# Of Options Exercise Expiration Price Appreciation
Options Granted to Price Date of for Option Term
Granted Employees ($/Sh) Grant -----------------------
5% ($) 10% ($)
- --------------------------------------------------------------------------------
Russell R. 110,000 32% $7.50 4/16/07 $518,838 $1,314,838
MacDonnell
David 65,000 19% 7.50 4/16/07 306,586 776,949
Heidecorn
Gregory J. 40,000 12% 7.50 4/16/07 188,668 478,123
Westhoff
Joseph J. 16,000 5% 7.50 4/16/07 75,467 191,249
Monachino
Peter M. 16,000 5% 7.50 4/16/07 75,467 191,249
Rogers
- --------------------------------------------------------------------------------
A total of 339,000 stock options were granted to certain members of
management on April 16, 1997 at $7.50 per share. The five
individuals named in the above table received 247,000 options. The
options expire on April 16, 2007 and vest over four years.
Options Exercised and Holdings
The following table sets forth certain information concerning stock
option exercises by the five individuals named in the Summary
Compensation Table during 1997, including the aggregate value of
gains on the date of exercise. In addition, this table includes the
number of shares covered by both exercisable and non-exercisable
stock options as of December 31, 1997. Also reported are the values
for "in-the-money" options which represent the positive spread
between the exercise price of any such existing stock options and
the closing market price of the Common Stock at December 31, 1997.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
Number of Unexercised Value of Unexercised in
Options at Fiscal the Money Options at
Year-End (1) Fiscal Year-End (2)
- --------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------
Russell R. 42,773 84,524 $449,116 $887,503
MacDonnell
David Heidecorn 23,886 49,762 250,808 522,502
Gregory H. Westhoff 14,968 30,920 157,167 324,661
Joseph J. Monachino 8,830 12,414 92,718 130,347
Peter M. Rogers 4,552 12,184 47,796 127,932
- --------------------------------------------------------------------------------
(1) Number of options that are exercisable and unexercisable as of
June 30, 1998.
(2) Value of exercisable and unexercisable options with a December
31, 1997 market price of $10.50. Grants in 1994 and 1995 have
a $0.33 exercise price and the 1997 grant has a $7.50 exercise
price.
Severance Agreements
Messrs. MacDonnell, Heidecorn and Westhoff are parties to severance
agreements (the "Severance Agreements") with the Company. The
Severance Agreements provide that in the event each is
involuntarily terminated by the Company without "cause" or resigns
for "good reason" (as such terms are defined in the Severance
Agreements), he will be provided with the following termination
payments and benefits: (a) any earned and accrued but unpaid
installment of his base salary; (b) an amount equal to the sum of
his annual base salary and the average of his last three years'
bonus compensation earned from the Company; (c) reimbursements of
reasonable expenses incurred for a period of one year in seeking
subsequent employment, to a maximum of $25,000; (d) benefit
continuation for a period of one year; and (e) awards under the
1997 Stock Incentive Plan will continue to vest or be exercisable
for the duration of the term of such award as if his employment
with the Company had continued during such term. In the event of
termination of employment by reason of his death, the Company will
pay to his designated beneficiary or estate the amounts and
benefits described in subparagraphs (a) and (b) above, and will
allow an acceleration of the vesting and exercisability of all
awards granted under the 1997 Stock Incentive Plan. In the event of
termination of employment for cause, disability, or his resignation
without good reason, then the Company will pay to him only the
payments and benefits described in subparagraph (a) above (except
that, in the case of a disability, such Executive will also receive
the benefits set forth in subparagraph (e) above).
In the event of the termination or resignation for any reason after
a "change in control" (as such term is defined in the Severance
Agreements) of the Company, the Company will pay to each individual
(i) the amounts described in subparagraph (a) in the previous
paragraph, (ii) the amounts described in paragraph (b) and (iii)
the benefits described in subparagraphs (c) and (d) in the previous
paragraph (the "Change in Control Benefits"). Termination or
resignation for any reason after a change in control will also
cause the accelerated vesting and lapse of restriction provisions
of the 1997 Stock Incentive Plan to become applicable to the awards
granted. The Change in Control Benefits and the accelerated vesting
and lapse in restriction provisions of the 1997 Stock Incentive
Plan will also be applicable in the event of his termination of
employment by the Company within the four month period (i) prior to
the date of a change in control of the Company, (ii) following
commencement of certain "tender offers" for the Company's stock,
(iii) following the execution by the Company of an agreement the
consummation of which would constitute a change in control, (iv)
following the solicitation of proxies for the election of directors
by anyone other than the Company, or (v) following the approval of
the Companys' stockholders of certain transactions the consummation
of which would result in a change of control.
The Severance Agreements provide for certain non-competition
restrictions on Messrs. MacDonnell, Heidecorn and Westhoff.
Pursuant to the Severance Agreements, they agree that they will not
(with certain exceptions) (i) during the period of their employment
with the Company, and (ii) in the event of the their termination or
resignation from their employment for any reason (other than in
connection with a change in control), for the one-year period
thereafter, own, manage, lend to or join (as an employee or
otherwise) any business which "competes" with the Company, as
defined in the Severance Agreements (generally, an entity will be
deemed to compete with the Company if it is engaged in the
residential and/or commercial security alarm business).
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the
"Committee"), which consists of three non-employee directors, is
responsible for reviewing and making recommendations to the Board
with respect to the Company's executive compensation policies.
The Company believes that there should be a direct relationship
between executive compensation and value delivered to stockholders
and the Company's compensation structure is based on this
philosophy. The Company believes that the base compensation for its
executives should be competitive, enabling the Company to attract
and retain the best available people. Additionally, the Company
believes that bonus compensation based on realistic targets
provides the motivation to the executive to strive to meet or
exceed Company goals. Since the inception of Alarmguard in 1992,
the Company has used stock options as a means of providing
performance-based compensation to all executive officers. The
Company believes that stock options are a key ingredient to
executive compensation because they serve to align the interest of
executive officers with stockholder value.
The compensation of the Company's Chief Executive Officer, Russell
R. MacDonnell, like the other executive officers, consists of a
combination of salary, bonus and stock options. In addition to
those factors applying generally to all executives as indicated
below, Mr. McDonnell's compensation for fiscal 1997 reflects the
Company's successful merger with Triton Group Ltd. in April 1997,
as well as the Company's growth in MRR1, EBITDA2 and Adjusted
EBITDA3 pursuant to the Company's aggressive growth plan.
The Company has entered into severance agreements with the three
key executives which provide for termination benefits under certain
circumstances, including a termination without cause or the
termination or resignation in connection with a change in control
of the Company. The termination benefits include one-year's annual
salary, an amount representing the average annual bonus amount paid
over the last three years and the continuation of certain health
and welfare plan benefits for up to one year.
In determining the compensation of the Company's executive
officers, which includes salary, bonus and stock options, the
Committee considers a combination of objective and subjective
performance criteria, all of which the Committee believes
contribute to stockholder value. Objective criteria include:
-- MRR, EBITDA and Adjusted EBITDA growth
-- MRR gross attrition
The Committee, in conjunction with the Board of Directors, reviews
the business plans and projections prepared by management and
compares the Company's actual performance to the objective criteria
set forth in such plans and projections.
Subjective criteria considered by the Committee in determining
executive officer compensation include the consummation of
appropriately priced acquisitions, the successful integration of
such acquisitions, growth in Alarmguard's direct marketing and
dealer programs, the enhancement of the Company's central
monitoring station and facilities and the success in capital
raising. Bonuses paid for fiscal year 1997 performance reflect
Alarmguard's merger with Triton Group Ltd. in April 1997, the
successful acquisition of several security companies, principally
Protective Alarms, Inc., and internal growth programs. The
Committee also considers compensation paid to other persons with
comparable skills and experience in the security industry and other
service industries, the Company's performance in comparison to its
competitors and performance in each executive's specific area of
responsibility.
Submitted by the Compensation
Committee of
The Company's Board of Directors,
April 15, 1998
Stuart L. Bell
Michael E. Cahr
Stephen L. Green
- -------------------------------------------------------------------
1. MRR means monthly recurring revenue that the Company (or, if
the context requires, another company in the security alarm
industry) is entitled to receive under contracts in effect at
the end of such period. MRR is a term commonly used in the
security alarm industry as a measure of the size of the
company. It does not measure profitability or performance, and
does not include any allowance for future subscriber attrition
or for uncollectible accounts receivable.
2. EBITDA is earnings before interest, income taxes, depreciation
and amortization.
3. Adjusted EBITDA is derived by adding to EBITDA the expenses net
of related revenues associated with the Company's Direct
Marketing Program and acquisition integration expenses.
Stock Performance Graph
The following chart compares the cumulative total stockholder
returns on the Common Stock since April 16, 1997 (the date on which
the Common Stock was first traded on the American Stock exchange
following the Merger with Triton Group Ltd.) to the cumulative
total returns over the same period of the Russell 2000 index and a
peer group index comprised of the common stock of Borg Warner
Security Corporation, The Pittston Brinks Group, Protection One,
Inc., and Response USA (the "Peer Group"). The Peer Group is based
on the selection of companies operating in the security alarm
monitoring business. The annual returns for the Peer Group index
are weighted based on the capitalization of each company within the
Peer Group at the beginning of each period for which a return is
indicated. The chart assumes the value of the investment in the
Common Stock and each index was $100 at April 16, 1997 and that all
dividends were reinvested.
[GRAPHIC OMITTED]
Compliance With Section 16(a) of the Securities and Exchange Act of
1934
Section 16(a) of the Securities and Exchange Act of 1934, as
amended, requires the Company's directors and executive officers
who own more than 10% of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission and
the American Stock Exchange initial reports of ownership and
reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than 10%
stockholders are required by Securities and Exchange Commission
regulation to furnish the Company with copies of all Section 16(a)
forms they file. To the Company's knowledge, based solely on review
of the copies of such reports furnished to the Company and written
representations that no other reports were required, all Section
16(a) filing requirements applicable to the Company's officers,
directors and greater than 10% beneficial owners were complied with
by such persons during the period ended December 31, 1997.
Other Business
No other matters are to be presented for action at the Annual
Meeting of Stockholders other than as set forth in this proxy
statement.
Independent Accountants
Ernst & Young, LLP, a firm of independent public accountants, was
engaged by the Company to examine its financial statements for the
1997 fiscal year. The appointment of auditors is approved annually
by the Board of Directors. The decision of the Board of Directors
is based on the recommendation of the Audit Committee. A
representative of Ernst & Young is expected to attend the Annual
Meeting of Stockholders and will have the opportunity to make a
statement if he or she desires to do so. The representative will
also be available to respond to appropriate questions from
stockholders.
Stockholder Proposals
Any stockholder of the Company who wishes to present a proposal at
the 1999 Annual Meeting of Stockholders of the Company, and who
wishes to have such proposal included in the Company's proxy
statement for that meeting, must deliver a copy of such proposal to
the Company at 125 Frontage Road, Orange, CT 06477, Attention:
David Heidecorn, no later than December 30, 1998; provided,
however, that if the 1999 Annual Meeting of Stockholders is held on
a date more than 30 days before or after the corresponding date of
the 1998 Annual Meeting, any stockholder who wishes to have a
proposal included in the Company's proxy statement for that meeting
must deliver a copy of the proposal to the Company a reasonable
time before the proxy solicitation is made. The Company reserves
the right to decline to include in the Company's proxy statement
any stockholder's proposal which does not comply with the rules of
the Securities and Exchange Commission for inclusion therein.
Financial Statements
The Company's 1997 Annual Report, including financial statements
for the fiscal year 1997, accompanies this proxy statement.
Stockholder's may obtain free of charge a copy of the Company's
most recent Annual Report on Form 10-K as filed with Securities and
Exchange Commission by writing to the Company at 125 Frontage Road,
Orange, CT 06477, Attention: Investor Relations.
You are encouraged to let us know your preference by marking the
appropriate boxes on the enclosed proxy.
