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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. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
SECURITY ASSOCIATES INTERNATIONAL
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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SECURITY ASSOCIATES INTERNATIONAL, INC.
2101 SOUTH ARLINGTON HEIGHTS ROAD
SUITE 100
ARLINGTON HEIGHTS, ILLINOIS 60005
(847) 956-8650
April 28, 2000
Dear Stockholder:
It is my pleasure to invite you to the 2000 Annual Meeting of
Stockholders of Security Associates International, Inc. The Annual Meeting will
be held at 10:00 a.m. Central Time, on May 23, 2000, at the Sheraton Suites,
located at 121 Northwest Point Boulevard, Elk Grove Village, Illinois.
The accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement describe the matters that will be discussed during the Annual Meeting.
It is important that you vote your shares whether or not you plan to attend the
Annual Meeting. To be sure your vote is counted, we urge you to carefully review
the Proxy Statement and COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
IN THE ACCOMPANYING ENVELOPE AS SOON AS POSSIBLE. If you attend the Annual
Meeting and wish to vote in person, the ballot that you submit at the Annual
Meeting will supercede your proxy.
I look forward to seeing you at the Annual Meeting. On behalf of the
management and Directors of Security Associates International, Inc., I thank you
in advance for your continued support and confidence in 2000.
Sincerely,
/s/ Ronald I. Davis
RONALD I. DAVIS
Chairman of the Board
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SECURITY ASSOCIATES INTERNATIONAL, INC.
2101 SOUTH ARLINGTON HEIGHTS ROAD
SUITE 100
ARLINGTON HEIGHTS, ILLINOIS 60005
(847) 956-8650
NOTICE OF ANNUAL MEETING OF STOCKHOLDER
TO BE HELD ON MAY 23, 2000, AT 10:00 A.M.
To the Stockholders of Security Associates International, Inc.:
The 2000 Annual Meeting of Stockholders of Security Associates
International, Inc., a Delaware corporation, will be held at 10 a.m. central
time, on May 23, 2000, at the Sheraton Suites, located at 121 Northwest Point
Boulevard, Elk Grove Village, Illinois. All of our stockholders are entitled and
encouraged to attend the Annual Meeting. The following agenda has been set by
the Board of Directors:
(1) To elect five Directors to hold office until the next Annual
Meeting of Stockholders as provided in our Bylaws;
(2) To ratify the selection of Arthur Andersen LLP as our independent
public accountants for the fiscal year ending December 31, 2000;
(3) To consider and vote upon an amendment to the Security Associates
International, Inc. Stock Option Plan to increase the number of
shares of common stock available under the plan from 1,800,000
shares to 2,800,000 shares; and
(4) To transact any other business as may properly come before the
Annual Meeting.
Owners of common stock and convertible preferred stock appearing on our
stock register at the close of business on April 7, 2000 (the date fixed by our
Board of Directors, and known as the "record date"), are entitled to receive
notice of the Annual Meeting and to vote at the Annual Meeting in person or by
proxy. For ten days before the Annual Meeting, we will keep a list with the
names, addresses, and holdings of the stockholders entitled to vote at the
Annual Meeting available at our home office, and at the offices of our transfer
agent, LaSalle National Bank, located at 135 South LaSalle Street, Chicago,
Illinois 60628. Any stockholder may inspect the list during normal business
hours. The list will be available for inspection at the Annual Meeting.
In order to be certain that sufficient votes are present to conduct
business at the Annual Meeting, we urge all stockholders who cannot attend to
complete, sign, date and return the enclosed proxy card in the envelope
provided, as soon as possible. Any stockholder has the right to revoke their
proxy at any time before it is voted. If you attend the Annual Meeting in person
and wish to revoke your proxy, you may do so at that time. In that event, your
proxy will be cancelled and you will be able to cast your vote in person.
By order of the Board of Directors:
/s/ James S. Brannen
James S. Brannen
President and CEO
Our 1999 Annual Report is enclosed with this notice.
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SECURITY ASSOCIATES INTERNATIONAL, INC.
2101 SOUTH ARLINGTON HEIGHTS ROAD
SUITE 100
ARLINGTON HEIGHTS, ILLINOIS 60005
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PROXY STATEMENT
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We are providing the following information in order to request the
authority to vote your shares at our 2000 Annual Meeting, and any adjournment.
The Annual Meeting will be held on May 23, 2000, at 10:00 a.m. central time, at
the Sheraton Suites, located at 121 Northwest Point Boulevard, Elk Grove
Village, Illinois, for the purposes stated in the Notice of Annual Meeting of
Stockholders accompanying this Proxy Statement.
VOTING OF SHARES
We are mailing this Proxy Statement and the enclosed proxy card on
April 28, 2000, to request your proxy for the Annual Meeting on behalf of our
Board of Directors. The purpose of proxy voting is to ensure that all
stockholders of record have an opportunity to vote on matters presented at the
Annual Meeting, whether or not they attend in person. You may vote your shares
only if you are present, or if you give your proxy to a person who will be
present, at the Annual Meeting.
Each share of our common stock represented at the Annual Meeting is
entitled to one vote and each share of convertible preferred stock is entitled
to 100 votes. However, the convertible preferred stock is limited to a maximum
of 45% of the votes eligible to vote on any matter presented for a vote of the
stockholders. If you intend to vote by proxy, please specify your choices by
marking the appropriate boxes on the enclosed proxy card and complete, sign,
date and return the proxy card to us, in the envelope provided, before 10:00
a.m. central time on May 23, 2000.
Directors are elected by a plurality of the votes cast at the Annual
Meeting, if a quorum is present. A plurality means that the five nominees for
Director with the largest number of votes will be elected. Any other matters
submitted for a vote will be decided by a majority of the votes cast. If you
mark "withhold authority" on your proxy card for any nominees for Director, or
if you mark your proxy to deny discretionary authority on other matters, your
vote will not be counted in determining whether a majority vote was obtained in
such matters.
If you sign the proxy card without giving any instructions, your shares
will be voted in favor of the election of all listed Director nominees and also
in favor of all of the other items listed in the Notice of Annual Meeting of
Stockholders. Your proxy will also exercise his discretion in voting on any
other matter brought before the Annual Meeting. We know of no matters, other
than those described in the Notice of Annual Meeting of Stockholders, that are
to come before the Annual Meeting. If a broker or other nominee does not vote on
a proposal, the votes represented by that stock will not be counted in
determining the number of votes cast. Stockholders voting by proxy may revoke
their proxy at any time before it is voted at the Annual Meeting by delivering a
proxy bearing a later date, by written revocation of the proxy or by attending
the Annual Meeting in person and casting a ballot.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR
PROXY CARD PROMPTLY, EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON.
THIS WILL ENSURE THAT YOUR SHARES ARE
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REPRESENTED.
As of the record date, April 7, 2000, 7,198,242 shares of common stock
and 136,359 shares of convertible preferred stock (which has the voting power of
13,635,900 shares of common stock limited to a maximum of 45% of the total
number of votes eligible to vote) were issued and outstanding. See "Certain
Relationships and Related Transactions."
A copy of our 1999 Annual Report is enclosed with this Proxy Statement.
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BOARD OF DIRECTORS
GENERAL
Our Board of Directors governs our business affairs. Our management
keeps the Board informed through various reports and information sent to them on
a regular basis and by means of financial reports that our President and other
officers routinely present at Board and committee meetings.
The Board met three times in 1999: in March, July and September (via
teleconference). All five Directors were present at each of these meetings. The
Board also acted by unanimous written consent, without a meeting, on eight
occasions during 1999.
Biographical information on the Director nominees can be found under
the caption "Item No. 1 - Election of Directors."
COMMITTEES
The Board has an Audit Committee and a Compensation Committee to assist
the Board in carrying out its duties.
The Audit Committee has three members: Thomas J. Salvatore, Michael B.
Jones and Douglas Oberlander. The Audit Committee reviews and examines the
adequacy of our internal controls and the objectivity and integrity of our
financial reporting. It also meets with our independent public accountants and
appropriate financial personnel in our company about these matters.
The Compensation Committee has three members: Thomas J. Salvatore,
Michael B. Jones and Douglas Oberlander. This committee monitors and makes
recommendations to the Board concerning the compensation of our Directors and
officers and administers the compensation plans for our executive officers. The
Compensation Committee's report on executive compensation is presented below
under the caption "Compensation Committee Report On Executive Compensation."
The Audit Committee and the Compensation Committee were established in
January 1998. The Audit Committee acted by written consent once in 1999, in
July. The Compensation Committee acted by written consent once in 1999, in July.
DIRECTOR COMPENSATION
All directors, other than Mr. Salvatore, are reimbursed for travel
expenses incurred in connection with attending board and committee meetings.
Directors are not entitled to additional fees for serving on committees of the
board. On January 6, 1998, when he joined the board of directors, Mr. Jones was
awarded options to purchase 10,000 shares of our common stock, at an exercise
price of $6.00 per share, which expire on December 31, 2002. On July 8, 1999,
the board extended the expiration date of Mr. Jones' options to July 8, 2005. On
March 10, 1999, directors Jones and Oberlander were awarded options to purchase
25,000 shares of common stock each under our Stock Option Plan. These options
are exercisable for a period of six years. Half of these options are exercisable
at $4.50 per share, and the other half at $6.00 per share.
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On January 11, 2000, directors Salvatore, Jones and Oberlander were awarded
options to purchase 25,000 shares of common stock each under our Stock Option
Plan, subject to stockholder approval. These options are exercisable for a
period of six years at $2.75 per share.
ITEM NO. 1 - ELECTION OF DIRECTORS
The Board has determined that the number of Directors shall be five, as
required by our by-laws. The five Directors will be elected at the Annual
Meeting. Each Director will serve until the next Annual Meeting of Stockholders
and until their respective successors are elected and qualified. The following
nominees have been selected and approved by the Board for submission to the
stockholders: Ronald I. Davis, James S. Brannen, Thomas J. Salvatore, Douglas
Oberlander and Michael B. Jones. Unless you give instructions to the contrary on
the enclosed proxy card, the proxy or his substitute will vote for these
nominees. If, prior to the Annual Meeting, any nominee should become unable or
unwilling to serve, your proxy will cast your votes for a substitute nominated
by the Board of Directors.
The nominees for Director, and certain information about them,
including their principal occupations for the past five years, are as follows:
RONALD I. DAVIS, age 61, is one of our founders and has been our
Chairman of the Board since October 1990. Prior to our incorporation, he had
many years of experience in the security alarm industry. He was the founder, and
from 1987 to 1990, the chairman and principal stockholder of SAI Partners, Inc.,
an alarm dealer buying group. SAI Partners, Inc. also provided alarm dealers
with other support services such as training and educational programs,
consulting, group insurance programs and certain proprietary alarm products
manufactured by others. From 1982 to 1987, Mr. Davis was president of Security
Alliance Corporation, a franchise company in the alarm industry and a joint
venture with Pittway Corporation. Prior to 1982, Mr. Davis was a full time
consultant to many of the alarm companies that now make up our dealer network.
Mr. Davis earned a B.A. from Roosevelt University.
JAMES S. BRANNEN, age 61, is one of our founders and has been a
director and our President since October 1990, and our Chief Executive Officer
since 1993. He was a self-employed consultant in the alarm industry from
February 1988 to October 1990. From 1962 until 1987, Mr. Brannen was employed by
the First National Bank of Chicago where he served as a senior vice president in
the commercial banking department. In that capacity, he managed, among others,
the commercial areas of the bank responsible for lending to the cable television
and paging industries. In addition, he managed the secured lending activity and
was responsible for organizing and managing the bank's first workout lending
activity. Mr. Brannen earned an A.B. degree from Dartmouth College and a MBA
degree from Northwestern University.
THOMAS J. SALVATORE, age 32, was elected as one of our directors in
December 1996. Since 1991, Mr. Salvatore has been the Managing General Partner
of TJS Management, L.P. which is the General Partner of TJS Partners, L.P.
("TJS"), our principal stockholder. TJS has a contractual right to designate two
directors to our Board of Directors and Mr. Salvatore is one of the designees.
The other director has not been designated as of the date of this prospectus.
Mr. Salvatore earned a Bachelors Degree in Business Administration from Fordham
University.
DOUGLAS OBERLANDER, age 50, was elected as one of our directors in
January
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1994. Since 1989, Mr. Oberlander has been president of Lease I, Inc. a
commercial lease and finance company. From 1965 to 1988, Mr. Oberlander was
employed by Oberlander Security, a security alarm dealer. Since 1991, Mr.
Oberlander has served as a director of Oberlander Alarms, a security alarm
dealer.
MICHAEL B. JONES, age 48, was elected as one of our directors in
January 1998. He has been president of ProFinance Associates, Inc. since he
co-founded it in 1985. ProFinance has been a Broker-Dealer firm since 1990. Mr.
Jones was with Marine Midland Bank from 1977 until 1985. He was responsible for
starting a communications/electronics lending group in 1991 and, in his last
position as group executive, for leading that group. That group was one of the
first institutional lenders to the alarm industry. Mr. Jones earned a Bachelors
Degree in Liberal Arts from the University of Arizona and a Masters Degree in
International Relations from the Johns Hopkins University School of Advanced
International Studies.
The five nominees with the largest numbers of votes cast at the Meeting
will be elected as Directors.
RECOMMENDATION:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FIVE NOMINEES LISTED ABOVE.
ITEM NO. 2 - RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
Our financial statements are included in our Annual Report which is
enclosed with this Proxy Statement. The Board of Directors has appointed Arthur
Andersen LLP as our independent public accountants to examine our financial
statements for the fiscal year ending December 31, 2000, and seeks your
ratification of this appointment. The Board of Directors believes that Arthur
Andersen LLP is knowledgeable about our operations and accounting practices and
is well qualified to act as our independent public accountants.
Arthur Andersen LLP acted as our principal accountants for the fiscal
year ended December 31, 1999. The total fees Arthur Andersen LLP charged us in
1999 were approximately $235,000. These fees included fees incurred in
connection with the audit of the annual financial statements, consultations in
connection with our filings with the Securities and Exchange Commission and the
preparation of our income tax returns. Arthur Andersen LLP has advised us that
it has no material direct or indirect financial interest in our company.
Our Audit Committee reviewed Arthur Andersen LLP's fees for auditing
our 1999 financial statements before the services were provided, and it will
review the 2000 audit fees before the services are provided. Generally, other
services to be provided by Arthur Andersen LLP will not require prior approval
by the Board of Directors, but will be subsequently reviewed by the Board of
Directors and the Audit Committee.
Although the selection of an independent accountant does not require a
vote of the stockholders, we believe that it is desirable to have the
stockholders ratify the selection. Due to the difficulty and expense involved in
retaining another independent firm of accountants on short
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notice, we do not contemplate appointing another firm to act as our independent
accountants for the fiscal year ending December 31, 2000 if the appointment of
Arthur Andersen LLP is not ratified. Instead, if the appointment of Arthur
Andersen LLP for the fiscal year ending December 31, 2000 is not ratified, the
Board of Directors will consider the vote as advice in making their selection of
an independent accountant for the following year. A representative of Arthur
Andersen LLP is expected to be present at the Annual Meeting and he or she will
be available to respond to appropriate questions.
The affirmative vote of a majority of votes present in person or by
proxy will be required to ratify the selection of Arthur Andersen LLP.
RECOMMENDATION:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
ARTHUR ANDERSEN LLP AS OUR INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR ENDING
DECEMBER 31, 2000.
ITEM NO. 3 - APPROVAL OF THE AMENDMENT TO
THE SECURITY ASSOCIATES INTERNATIONAL, INC.
STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON
STOCK AVAILABLE UNDER THE PLAN FROM 1,800,000 SHARES TO 2,800,000 SHARES.
On March 10, 1999, the Board of Directors adopted the Security
Associates International, Inc. Stock Option Plan, subject to stockholder
approval, which was obtained at the 1999 Annual Meeting. The plan now provides
for awards of options to purchase up to 1,800,000 shares of common stock.
On January 11, 2000, the Board of Directors voted to amend the Stock
Option Plan to provide for awards of options to purchase up to 1,000,000
additional shares of common stock, subject to stockholder approval. The Board of
Directors seeks stockholder approval for this increase. A copy of the proposed
amendment is attached to this proxy as Annex A.
DISCUSSION OF AMENDMENT
Of the original 1,800,000 shares available for option awards under the
plan, options to purchase 1,580,000 shares have been awarded as of December 31,
1999. The Board recognized that additional awards would assist us in motivating
our existing officers, directors and key employees as well as in recruiting new,
skilled employees. The Board determined that the number of options remaining is
insufficient to effect these purposes.
STOCK OPTION PLAN
The purpose of our Stock Option Plan is to advance the interests and
enhance the value of our company by:
- aligning the economic interests of our key employees, consultants and
Directors with those of our stockholders;
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- inducing individuals of outstanding ability and potential to join
and/or remain with us; and
- providing key employees, consultants and Directors with an additional
incentive to contribute to our success.
The Stock Option Plan is administered by a committee of the Board of
Directors. The committee has discretion as to which employees, non-employee
Directors, consultants or independent contractors will receive options. The
committee also establishes the terms, conditions and limitations of each option,
including the type and amount of the option, the number of shares of common
stock underlying each option, the exercise price and the date or dates upon
which the option vests and become exercisable.
Our Stock Option Plan permits grants of qualified incentive stock
options, as defined by the Internal Revenue Code, and also non-qualified stock
options. Qualified incentive options must have a per share exercise price at
least equal to the market price of the underlying common stock at the time the
option is granted. If a qualified incentive option is granted to any
participant who owns more than ten percent of the voting power of our company
(a "Significant Stockholder"), then the exercise price per share must be not
less than one hundred ten percent (110%) of this price. The exercise price for
non-qualified options will be determined by the committee in its sole
discretion on the date of grant, and may be less than fair market value.
Each participant receiving a qualified incentive option must be an
employee of our company or of a subsidiary at the time an incentive option is
granted. The maximum exercise period may not be greater than ten years
(qualified incentive options granted to a Significant Stockholder will have an
exercise period of five years). The fair market value of shares as to which
qualified incentive options are exercisable for the first time by any key
employee during any single calendar year (under this Plan and any other
incentive option plan of our company or a subsidiary) may not exceed $100,000.
A participant who ceases to be an employee, consultant or Director of
our company or a subsidiary for any reason other than death, disability or
termination "for cause" will be permitted to exercise any option, to the extent
it is vested, within three months of such termination. If a participant dies,
his or her estate or personal representative may exercise the option, to the
extent it was vested and exercisable on the date of death. If a participant
becomes permanently disabled, he or she may exercise the option to the extent it
was vested and exercisable at the time of the onset of the disability or, if the
option vests periodically, to the extent it would have been exercisable as of
the next periodic vesting date. In the case of either death or disability, the
option must be exercised within twelve (12) months after the date of death or
onset of disability, and/or prior to the original expiration date of the option.
A participant who is terminated "for cause" will immediately lose all rights to
exercise any options.
On March 10, 1999, the Board of Directors granted options to purchase
common stock under the Stock Option Plan to certain executive officers subject
to stockholder approval of the Plan. We received stockholder approval at the
1999 Annual Meeting. Half of the options are exercisable at $4.50 per share and
half are exercisable at $6.00 per share. The options vest over a three year
period (one-third per year, with all of the $4.50 options vesting first), and
expire on the sixth anniversary of the grant date. In the event of a stock split
or other similar events, the number of options will be increased or decreased to
adjust for the split.
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On January 11, 2000 the Board of Directors granted additional options
to purchase common stock under the Stock Option Plan to certain executive
officers subject to stockholder approval of an amendment of the Plan, providing
for availability of additional options. The options are exercisable at $2.75 per
share, vest over a two-year period and expire on the sixth anniversary of the
grant date. In the event of a stock split or other similar events, the number of
options will be increased or decreased to adjust for the split.
On February 14, 2000 the Board of Directors granted additional options
to purchase common stock under the Stock Option Plan to two new executive
officers subject to stockholder approval of an amendment of the Plan, providing
for availability of additional options. The options are exercisable at $2.875
per share, vest over a three-year period (one-third per year) and expire on the
sixth anniversary of the grant date. In the event of a stock split or other
similar events, the number of options will be increased or decreased to adjust
for the split.
The Board may amend the Stock Option Plan in any respect and it will
seek stockholder approval for such amendments, when approval is required by the
Internal Revenue Code or another federal or state statute or the rules of the
American Stock Exchange or any other exchange on which our shares may be listed.
The Board may terminate the Stock Option Plan at any time. However, no
termination or amendment will affect the rights of participants under options
previously granted without the participant's consent. Unless previously
terminated, the Stock Option Plan will terminate on March 10, 2009, and no
options will be granted after that date.
The proposed amendment to the Stock Option Plan will increase the
number of shares allocated to the Stock Option Plan by 1,000,000 shares, to a
total of 2,800,000 shares. As of April 17, 2000 the market value of the
additional 1,000,000 shares is $ 3,375,000. The Board of Directors has
determined that this number of shares is consistent with our business
objectives.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
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The following table presents the benefits or amounts that will be
received by or allocated to each of the following individuals under the Stock
Option Plan if the amendment providing for options to purchase an additional
1,000,000 shares of common stock is approved:
NEW PLAN BENEFITS
SECURITY ASSOCIATES INTERNATIONAL, INC. STOCK OPTION PLAN, AS AMENDED
Name And Position No. of Shares
Underlying Option
Granted(1)
James S. Brannen
President and Chief Executive Officer 105,000
Ronald I. Davis
Chairman of the Board 105,000
Stephen Rubin
Senior Vice President 105,000
Ronald J. Carr
Senior Vice President 150,000
Daniel S. Zittnan
Senior Vice President 150,000
Executive Group (9 individuals) 865,000(2)
Non-Executive Director Group (3 individuals) 75,000
Non-Executive Officer Employee Group (398 individuals) 60,000
1) The New Plan Benefits Table reflects the number of shares underlying
the options that the Board has authorized to be granted in the 2000
calendar year pursuant to the amendment, subject to stockholder
approval.
2) Options to purchase 765,000 shares are exercisable at $2.75 per share,
vest over a two-year period and expire on the sixth anniversary of the
grant date. Options to purchase 100,000 shares, are exercisable at
$2.875 per share, vest over a three-year period and expire on the sixth
anniversary of the grant date. All of he $2.875 options were issued to
newly appointed executive officers who are not Named Executive
Officers.
Federal Income Tax Consequences
The following is a summary of the federal income tax consequences of
the Stock Option Plan.
In general, a participant will not recognize ordinary income upon the
grant or exercise of a qualified incentive stock option. If the participant
holds the stock acquired through the exercise of a qualified incentive stock
option for one year from the date of exercise and two years from the date of the
grant, the participant will recognize long-term capital gain or loss upon a
subsequent sale of the stock, based upon the difference between the exercise
price and the sale price. However, if the participant sells the stock before the
requisite holding periods have elapsed, the participant will recognize ordinary
income equal to the difference between the
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exercise price and the lesser of the sales price or the fair market value on the
date of exercise.
A participant will not recognize ordinary income upon the grant of a
non-qualified option. Unlike qualified incentive stock options, however, a
participant generally will recognize ordinary income upon exercise of the
option, in an amount equal to the difference between the exercise price for the
option and the fair market value of the common stock on the exercise date. The
common stock acquired through such exercise will have a tax basis equal to the
exercise price plus any income recognized upon the exercise of the option. Upon
the subsequent sale of the common stock, a participant generally will recognize
a capital gain or loss equal to the excess of the sale price of the common stock
over the participant's tax basis in the stock. The capital gain or loss will be
long-term or short-term, depending upon the holding period of the shares.
Neither the grant nor the exercise of a qualified option under the
Stock Option Plan will have a tax consequence to our company. However, the
exercise of a non-qualified option will entitle our company to a business
expense deduction equal to any ordinary income recognized by participants as
compensation under the Stock Option Plan.
The affirmative vote of a majority of the votes present in person or by
proxy will be required to approve the amendment to the Stock Option Plan.
RECOMMENDATION:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON
STOCK AVAILABLE UNDER THE PLAN FROM 1,800,000 SHARES TO 2,800,000 SHARES.
OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING
If any other matter properly comes before the Annual Meeting, the proxy
will vote your shares in accordance with his best judgment. At the time this
Proxy Statement went to press, we knew of no other matters to be presented for
stockholder action at the Annual Meeting.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Neither our company nor the Compensation Committee has formally adopted
a compensation policy for our executive officers. However, our ultimate goal is
to attract, retain and motivate qualified personnel to ensure our long-term
success. The Compensation Committee reviewed the informal compensation policy
for our executive officers in order to align executive compensation with our
business objectives, the economic interests of our stockholders and reward
superior performance. Executive compensation has generally consisted of three
principal components: base salary, bonus, and equity participation in our
company. Equity participation is awarded through the grant of options under our
Stock Option Plan.
It is the responsibility of the Compensation Committee to address the
provisions of Section 162(m) of the Internal Revenue code which, except in the
case of "performance-based compensation" and certain other types of
compensation, limits to $1,000,000 the amount of our
- -12-
<PAGE> 14
federal income tax deduction for compensation paid to our Chief Executive
Officer and the other four most highly paid executive officers. In that regard,
the Compensation Committee must determine whether any actions with respect to
Section 162(m) should be taken by SAI. The Compensation Committee has determined
that the Section 162(m) deduction limitation will not apply in 2000. The
Compensation Committee will continue to monitor the provisions of Section 162(m)
and will take appropriate action when it is warranted in the future.
On March 10, 1999, the Board approved our Stock Option Plan, which was
approved by our stockholders on July 8, 1999. A committee of the Board of
Directors administers the Stock Option Plan. The committee has discretion as to
which employees, non-employee Directors, consultants or independent contractors
will receive options. The committee also establishes the terms, conditions and
limitations of each option, including the type and amount of the option, the
number of shares of common stock underlying each option, the exercise price and
the date or dates upon which the option vests and become exercisable. The
maximum exercise period of these options may not be greater than ten years
(qualified incentive options granted to any participant who owns more than ten
percent of the voting power of our company will have an exercise period of five
years). The fair market value of shares as to which qualified incentive options
are exercisable for the first time by any key employee during any single
calendar year (under this Plan and any other incentive option plan of our
company or a subsidiary) may not exceed $100,000.
On March 10, 1999, the Board of Directors granted options to purchase
common stock under the Stock Option Plan to certain executive officers subject
to stockholder approval of the Plan. We received stockholder approval at the
1999 Annual Meeting. Half of these options are exercisable at $4.50 per share
and half are exercisable at $6.00 per share. The options will vest over a
three-year period (one-third per year, with all of the $4.50 options vesting
first), and expire on the sixth anniversary of the grant date.
On January 11, 2000 the Board of Directors granted additional options
to purchase common stock under the Stock Option Plan to certain executive
officers subject to stockholder approval of an amendment to the Plan providing
for availability of additional options. The options are exercisable at $2.75 per
share, vest over a two year period and expire on the sixth anniversary of the
grant date. On February 14, 2000 our Board of Directors granted additional
options to purchase common stock under the Stock Option Plan to certain newly
appointed executive officers subject to stockholder approval of an amendment to
the Plan providing for availability of additional options. The options are
exercisable at $2.875 per share, vest over a three year period and expire on the
sixth anniversary of the grant date. A list of the options granted pursuant to
the amendment, subject to stockholder approval, is found in the section titled
"Item 3- Approval of Amendment to the Security Associates International, Inc.
Stock Option Plan - New Plan Benefits" table.
On August 29, 1996, we entered into a three-year employment agreement
with James S. Brannen to serve as our President and Chief Executive Officer.
This agreement automatically renews for one-year terms after the initial term,
unless terminated. Under that agreement, Mr. Brannen currently receives an
annual salary of $175,000, which may be increased following an annual salary
review. In addition, Mr. Brannen will participate in any additional benefits the
Board of Directors makes available to our other executive employees.
The salary, bonus and common stock option awards that we paid or
granted to the Chief
- -13-
<PAGE> 15
Executive Officer and to our other most highly compensated executive officers in
1999 are set forth in the tables in the section titled "Executive Compensation."
The Compensation Committee believes that our executive officers are dedicated to
increasing stockholder value and that our compensation structure, including the
Stock Option Plan, will enhance their dedication and focus. Pursuant to Item
402(a)(9) of Regulation S-K promulgated by the Securities and Exchange
Commission, neither the "Compensation Committee Report on Executive
Compensation" nor the material under the caption "Stockholder Return and
Performance Graph" shall be deemed to be filed with the SEC for purposes of the
Securities Exchange Act, nor shall such report or such material be deemed to be
incorporated by reference in any past or future filing by SAI under the
Securities Exchange Act or the Securities Act.
THE COMPENSATION COMMITTEE
Thomas J. Salvatore Michael B. Jones Douglas Oberlander
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee is presently composed of Thomas J.
Salvatore, Michael B. Jones and Douglas Oberlander. None of the members of the
Compensation Committee is, or was formerly, an officer or employee of our
company. Mr. Salvatore is a controlling party of TJS Partners, L.P. Our
company's relationship with TJS is described below under the caption "Certain
Relationships and Related Transactions."
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
- -14-
<PAGE> 16
STOCKHOLDER RETURN AND PERFORMANCE GRAPH
Presented below is a line graph comparing the percent change in the
cumulative total stockholder return on our common stock against the Russell 2000
Index and the Mallon Global Security Index. The graph assumes that $100 was
invested on January 1, 1995, in our common stock and each of the Russell 2000
Index and the Mallon Global Security Index, and that all dividends were
reinvested.
TOTAL STOCKHOLDER RETURNS
PERFORMANCE GRAPH FOR SECURITY ASSOCIATES INTERNATIONAL, INC.
Prepared by Buttonwood Advisory Group
Produced on February 17, 2000 including data to December 31, 1999.
$100 invested January 1, 1995
(assumes all dividends reinvested)
FISCAL YEAR ENDED DECEMBER 31, 1999
[GRAPH OF INFORMATION IN THE FOLLOWING TABLE]
ASSUMES $100 INVESTED ON JANUARY 1, 1995
ASSUMES DIVIDENDS REINVESTED THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
MEASUREMENT PERIOD RUSSELL 2000 INDEX MALLON GLOBAL SECURITY INDEX SAI
- ------------------ ------------------ ---------------------------- ---
<S> <C> <C> <C>
January 1, 1995(1) $ 100.00 $ 100.00 $ 100.00
FYE 1995 $ 127.79 $ 148.70 $ 160.00
FYE 1996 $ 145.04 $ 210.41 $1,125.00
FYE 1997 $ 178.80 $ 253.13 $2,125.00
FYE 1998 $ 168.78 $ 256.45 $1,575.00
FYE 1999 $ 201.90 $ 205.16 $1,550.00
</TABLE>
1) The price of our common stock was $0.25 on this date.
EXECUTIVE OFFICERS
The following table presents information with respect to our executive
officers. The biographies of James S. Brannen and Ronald I. Davis appear above
under Item No. 1 - Election of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
RONALD I. DAVIS 61 CHAIRMAN OF THE BOARD OF DIRECTORS
JAMES S. BRANNEN 61 PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
RONALD J. CARR 48 SENIOR VICE PRESIDENT
</TABLE>
- -15-
<PAGE> 17
<TABLE>
<S> <C> <C>
STEPHEN RUBIN 53 SENIOR VICE PRESIDENT
HOWARD SCHICKLER 52 SENIOR VICE PRESIDENT, GENERAL COUNSEL, AND SECRETARY
DANIEL S. ZITTNAN 45 SENIOR VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER
KAREN B. DANIELS 45 VICE PRESIDENT
JAMES N. JENNINGS 32 VICE PRESIDENT, CORPORATE COUNSEL AND ASSISTANT SECRETARY
GLENN D. SEABURG 40 VICE PRESIDENT
</TABLE>
RONALD J. CARR has been one of our Vice Presidents since March 1997,
and a Senior Vice President and Chief Operating Officer for the Central Station
Division since August 12, 1998. Mr. Carr is also the President of
Telecommunications Associates Group, Inc., Texas Security Central, Inc., Alarm
Central Monitoring, Inc., Guardian Protection Services, Ltd., and AMJ Central
Station Corporation, Inc., all wholly owned subsidiaries of Security Associates
International, Inc., and he is a member of the board of directors of the Central
Station Alarm Association. From March 1996 to March 1997, Mr. Carr was director
of Telecommunications and Central Station Operations for Ameritech's
SecurityLink subsidiary. From 1991 to 1996 he was director of Telecommunications
for ADT, Inc. Mr. Carr earned a Bachelors Degree in Business Administration from
Brookdale College.
STEPHEN RUBIN is one of our founders, has been a Senior Vice President
since October 1990. From 1987 to 1990, he was a senior vice president of SAI
Partners, Inc. From 1978 to 1986, Mr. Rubin was an officer of Davis Marketing
Group and Security Alliance Corporation. Mr. Rubin earned a B.S. degree from
Northern Michigan University and MBA degree from Loyola University. Mr. Rubin
has the principal responsibility for the design and implementation of our
marketing program.
HOWARD SCHICKLER has served as General Counsel of our company since
January 3, 1997, was appointed Secretary on October 7, 1997, Vice President on
April 13, 1998 and Senior Vice President on July 8, 1999. Before joining us, Mr.
Schickler spent eight years with Sachnoff & Weaver, Ltd., a Chicago law firm. He
became a member of that firm in 1994. Before embarking on his legal career, Mr.
Schickler was employed in the investment field as an institutional fixed income
sales representative for The First Boston Corporation, Morgan Stanley & Co.,
Blunt, Ellis and Loewi and E. F. Hutton & Co. and as a portfolio manager at MGIC
Investment Corporation. Mr. Schickler earned a B.A. degree from Brooklyn
College, M.A., M.B.A. degrees from The University of Wisconsin at Milwaukee and
a J.D. degree from Northwestern University.
DANIEL S. ZITTNAN was named our Senior Vice President for Finance on
August 12, 1998, and has served as our Chief Financial Officer and Treasurer
since October 7, 1997. Mr. Zittnan spent over thirteen years with Arthur
Andersen LLP, most recently as a senior manager. Mr. Zittnan earned a BA in
accounting from DePaul University and is a member of the AICPA and ICPA
societies.
KAREN B. DANIELS has served as a Vice President since October 7, 1997.
Prior to becoming a Vice President, Ms. Daniels acted as a consultant for the
Company starting in March 1997, and prior to that for Ameritech AIIS, since
1995. From March 1990 to June 1995, Ms. Daniels was vice president/controller
for Editel-Chicago, a division of Unitel Video, Inc., a video post-production
company. Ms. Daniels earned a Bachelor's Degree in Industrial
Administration-Finance from Iowa State University. Ms. Daniels is also a
Certified Public Accountant.
- -16-
<PAGE> 18
JAMES N. JENNINGS has served as Corporate Counsel of our company since
January 1998, was appointed Assistant Secretary in February 1998 and Vice
President in February 2000. Prior to joining us, Mr. Jennings spent a combined
three years with Shefsky & Froelich, Ltd. and McCarthy Duffy Neidhart & Snakard,
both Chicago law firms. Prior to entering private practice, Mr. Jennings was an
independent investment banker for three years. Mr. Jennings earned a Bachelors
Degree from the University of Texas at Austin and a J.D. from California Western
School of Law.
GLENN D. SEABURG has served as Director of Information Technology since
September of 1998 and was appointed Vice President in February 2000. Prior to
joining us, Mr. Seaburg was the Director of I.S./Telecommunications for the
Signature Security Group from October 1998 to October 1999. From November 1987
to September 1998, Mr. Seaburg was employed by SecurityLink by Ameritech as its
Manager System Development Project Manager. Prior to Ameritech's purchase of
SecurityLink, Mr. Seaburg was Director of Information Systems for SecurityLink
for three years.
Our executive officers are appointed annually by the Board of
Directors, and they serve at the Board's discretion, until their successors are
duly elected and qualified or until his or her death, resignation or removal by
the Board. Ronald I. Davis and Stephen Rubin are brothers-in-law. There are no
other family relationships between any of our Directors or executive officers.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
- -17-
<PAGE> 19
EXECUTIVE COMPENSATION
GENERAL
The following table is a summary of the compensation awarded or earned
by our President and Chief Executive Officer and the other most highly paid
executive officers (the "Named Executive Officers") during the last three fiscal
years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS PAYOUTS
SECURITIES
RESTRICTED UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARDS SARS(#) PAYOUTS(4) COMPENSATION(5)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James S. Brannen 1999 $175,000 $72,417 210,000 -- $ 3,433
President and Chief 1998 $175,000 $55,000 $29,100(1) -- -- $108,888 $ 2,019
Executive Officer 1997 $125,000 $11,635 -- -- $154,103 $ 837
$32,215(1)
$23,835(1)
Ronald I. Davis 1999 $175,000 $78,500 210,000 -- $ 3,433
Chairman of the 1998 $175,000 $55,000 $28,050(2) -- -- $108,888 $ 676
Board(6) 1997 $125,858 $11,635 $31,889(2) -- -- $154,103 $ 843
$22,949(2)
Stephen Rubin 1999 $140,000 $43,156 210,000 -- $ 2,746
Senior Vice President 1998 $127,400 $40,000 $15,350(3) -- -- $67,568 $ 697
1997 $104,999 $ 8,462 $16,456(3) -- -- $95,625 $ 694
$11,586(3)
Ronald J. Carr 1999 $140,000 -- $12,000(7) 300,000 -- $ 1,703
Senior Vice 1998 $126,538 -- $10,750(7) -- -- $67,568 $ 646
President(6)
Daniel S. Zittnan(8) 1999 $140,000 -- $12,000(9) 300,000 -- $ 1,696
Senior Vice President 1998 $139,615 -- $4,000(9) -- -- $67,568 --
</TABLE>
- ------------------------------
1) Includes $22,871, $24,965 and $24,000 for automobile allowances for 1997,
1998 and 1999, respectively.
2) Includes $22,319, $25,439 and $24,000 for automobile allowances for 1997,
1998 and 1999, respectively.
3) Includes $10,750, $11,856 and $12,000 for automobile allowances for 1997,
1998 and 1999, respectively.
4) Earned awards under our Supplemental Employees' Retirement Plan.
5) Amount is matching funds pursuant to our 401(k) Plan.
6) Annual salary and bonus did not exceed $100,000 in 1997.
7) Includes $10,750 and $12,000 for automobile allowance in 1998 and 1999,
respectively.
8) Annual salary and bonus did not exceed $100,000 in 1997.
9) Includes $4,000 and $12,000 for automobile allowance in 1998 and 1999,
respectively.
- -18-
<PAGE> 20
OPTION GRANTS TABLE
The following table contains information concerning options granted to
the Named Executive Officers in 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION TERM
- -----------------------------------------------------------------------------------------------------------------------
NAME NUMBER OF PERCENT OF EXERCISE OR EXPIRATION 5% ($) 10% ($)
SECURITIES TOTAL OPTIONS BASE PRICE DATE
UNDERLYING GRANTED TO ($/SH) (1)
OPTIONS EMPLOYEES IN
GRANTED FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
James S. Brannen 210,000 13% 50% @ $4.50 March 10, 2005 $0 $ 85,542
50% @ $6.00
- -----------------------------------------------------------------------------------------------------------------------
Ronald I. Davis 210,000 13% 50% @ $4.50 March 10, 2005 $0 $ 85,542
50% @ $6.00
- -----------------------------------------------------------------------------------------------------------------------
Stephen Rubin 210,000 13% 50% @ $4.50 March 10, 2005 $0 $ 85,542
50% @ $6.00
- -----------------------------------------------------------------------------------------------------------------------
Ronald J. Carr 300,000 19% 50% @ $4.50 March 10, 2005 $0 $ 122,203
50% @ $6.00
- -----------------------------------------------------------------------------------------------------------------------
Daniel S. Zittnan 300,000 19% 50% @ $4.50 March 10, 2005 $0 $ 122,203
50% @ $6.00
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
1) The options become exercisable over a three year period beginning March 10,
1999 (one third per year with all of the $4.50 options vesting first).
FISCAL YEAR END OPTION VALUE TABLE
The following table contains information concerning the value of stock
options held by the Named Executive Officers at fiscal year end 1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS/SARS AT MONEY OPTIONS/SARS AT FISCAL
FISCAL YEAR END YEAR END
SHARES ACQUIRED
NAME ON EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
James S. Brannen -- -- 0/210,000 --/--
Ronald I. Davis -- -- 0/210,000 --/--
Stephen Rubin -- -- 0/210,000 --/--
Ronald J. Carr -- -- 0/300,000 --/--
Daniel S. Zittnan -- -- 0/300,000 --/--
</TABLE>
- -19-
<PAGE> 21
EMPLOYMENT AGREEMENTS
In August, 1996, we entered into three year employment agreements with
James S. Brannen, Ronald I. Davis and Stephen Rubin to serve as our President
and Chief Executive Officer, Chairman of the Board of Directors, and Senior Vice
President, respectively. These employment agreements were amended in July 1999.
Pursuant thereto, Mr. Brannen and Mr. Davis currently receive an annual salary
of $175,000, and Mr. Rubin receives an annual salary of $145,000. These amounts
may be increased following annual salary reviews. The employment agreements
provide that these executives will be entitled to severance pay equal to 2.99
times their annual salary at the time of termination at the time of termination
upon: (i) expiration of the term of the employment agreement (including any
renewals) unless terminated for cause, as defined in the employment agreement;
(ii) death or disability; or (iii) if they terminate their employment because
of: (a) a diminution of responsibilities or authority or being assigned duties
inconsistent with their current position; (b) a requirement that they serve from
a location other than the greater Chicago metropolitan area; (c) breach of the
employment agreement by SAI; or (d) a change of control of SAI. In addition,
Messrs. Brannen, Davis and Rubin will participate in such other benefits as are
offered to other executive employees of our company. In addition, they are
entitled to participate in such other benefits as are offered to other executive
employees. These agreements automatically renew for successive one-year periods.
We have entered into Confidentiality Agreements with all of our other
executive officers. These agreements contain non-compete, non-solicitation, and
confidentiality provisions, and also provide that in the event of termination of
the executive officer as a result of a change of control, the executive officer
will be paid a one-time cash payment equal to 2.99 times his or her salary, plus
an additional payment to compensate the employee for any federal excise tax
imposed as a result of this payment.
Under our Stock Option Plan, certain executive officers were granted
options to purchase shares of our common stock. Under the terms of each
executive officer's stock option agreement, which describes the terms of his or
her options, half of the options are exercisable at $4.50 per share and half are
exercisable at $6.00 per share. The options will expire in six (6) years and
will vest over three (3) years. If our company undergoes certain change of
control transactions, however, the options will vest immediately. For a
description of this plan, please refer to "Item 3- Approval of the Amendment to
the Security Associates International, Inc. Stock Option Plan to Increase the
Number of Shares of Common Stock Available Under the Plan From 1,800,000 Shares
to 2,800,000 Shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 30, 1999, we entered into the Second Amendment to Security
Associates International, Inc. Common Stock Subscription and Purchase Agreement
with TJS Partners, L.P., our principal stockholder. Pursuant to this agreement:
(i) $10,000,000 of subordinated debt and accrued interest owed by us to TJS
Partners, L.P.; (ii) 66,910 shares of Convertible Preferred Stock; and, (iii)
500,000 shares of 12% Redeemable Preferred Stock, together with all accrued
dividends, which were held by TJS Partners, L.P., were exchanged for 135,709
shares of newly designated Series A Convertible Preferred Stock.
- -20-
<PAGE> 22
The Series A Convertible Preferred Stock has a $10 par value, a
liquidation preference of $350 per share and is convertible into 13,570,900
shares of our common stock. The Series A Convertible Preferred Stock is also
entitled to receive dividends equal to those that would have been received if
the holder had converted into common stock.
The holder of Series A Convertible Preferred Stock is entitled to vote
on all matters on which holders of our common stock are entitled to vote, on an
as-converted basis. However, the total voting power of all securities owned by
the holder of Series A Convertible Preferred Stock is limited to a maximum of
45% of the total number of votes eligible to vote on a matter submitted to our
stockholders.
In connection with the Second Amendment, our By-laws were amended to
increase the percentage of votes required to approve matters presented to the
stockholders from a simple majority to greater than sixty (60) percent. This
super-majority provision will be in effect for as long as TJS Partners, L.P.
owns 30% of our common stock on an as-converted basis. Additionally, for so long
as TJS Partners, L.P. owns at least fifteen percent (15%) of our common stock on
an as-converted basis, our Board of Directors will consist of five Directors.
TJS has the right to nominate two directors.
During 1999, TJS exercised options to purchase 250 shares of
Convertible Preferred Stock for an aggregate purchase price of $25,000.
During 1999, TJS exercised options to purchase 650 shares of Series A
Convertible Preferred Stock for an aggregate purchase price of $71,250.
On February 9, 2000, TJS advanced to us $125,000 in anticipation of the
exercise of standby options to purchase 500 shares of Series A Convertible
Preferred Stock.
On February 25, 2000, TJS advanced to us $79,093 in anticipation of the
exercise of standby options to purchase 827 shares of Series A Convertible
Preferred Stock.
On January 6, 1998, when he joined the Board of Directors, Mr. Jones
was awarded options to purchase 10,000 shares of our common stock, at an
exercise price of $6.00 per share. These options were to expire on December 31,
2002. On July 8, 1999, the Board extended the expiration date of Mr. Jones'
options to July 8, 2005.
On January 6, 1998, ProFinance Associates, Inc. was issued options to
purchase 25,000 shares of common stock at a price of $6.00 per share. These
options were to expire on December 31, 2002, and were issued in partial
consideration of brokerage services rendered to us. Michael B. Jones, currently
one of our directors, is a principal of ProFinance Associates, Inc. On July 8,
1999, the Board extended the expiration date of these options to July 8, 2005.
These options were subsequently transferred into a family trust.
On March 10, 1999, Directors Jones and Oberlander were awarded options
to purchase 25,000 shares of commons stock each under our Stock Option Plan.
These options are exercisable for a period of six years. Half of these options
are exercisable at $4.50 per share, and the other half at $6.00 per share.
- -21-
<PAGE> 23
On March 31, 1999, we issued 35,160 shares of common stock to a former
employee as a distribution from our Supplemental Employees' Retirement Plan upon
his termination as an employee. These shares were registered on Form S-8 on May
6, 1999.
On May 24, 1999, we issued 23,440 shares of common stock to a former
employee as a distribution from our Supplemental Employees' Retirement Plan upon
his termination as an employee. These shares were registered on Form S-8 on May
6, 1999.
On June 21, 1999, we issued the following shares of common stock to
the following employees, as terminating distributions from our Supplemental
Employees' Retirement Plan:
James S. Brannen 56,662 shares
Ronald I. Davis 56,662 shares
Stephen Rubin 35,160 shares
Daniel S. Zittnan 35,160 shares
Ronald J. Carr 35,160 shares
Howard Schickler 17,580 shares
Karen B. Daniels 25,975 shares
These shares were registered on Form S-8 on May 6, 1999.
On July 8, 1999, we issued stock options to the following
individuals to purchase the following numbers of shares of common stock, as
awards under our Stock Option Plan:
Options to Purchase
-------------------
Michael B. Jones 25,000 shares
Douglas J. Oberlander 25,000 shares
James S. Brannen 210,000 shares
Ronald I. Davis 210,000 shares
Stephen Rubin 210,000 shares
Daniel S. Zittnan 300,000 shares
Ronald J. Carr 300,000 shares
Howard Schickler 150,000 shares
Karen B. Daniels 150,000 shares
One-half of each of the foregoing persons' options are exercisable at $4.50 per
share with the other one-half being exercisable at $6.00 per share. The options
of the officers vest over three years and expire six years from the date of
grant. The directors' options vest immediately and expire six years from the
date of grant.
On June 21, 1999, Beverly Davis, wife of Ronald I. Davis, exercised
options to purchase 5,000 shares of common stock for an aggregate exercise price
of $5,000.
On January 11, 2000, the board of directors approved the issuance of
stock options to the following individuals to purchase the following numbers of
shares of common stock, as awards under our Stock Option Plan, subject to
stockholder approval:
- -22-
<PAGE> 24
Options to Purchase
-------------------
Thomas J. Salvatore 25,000 shares
Michael B. Jones 25,000 shares
Douglas J. Oberlander 25,000 shares
James S. Brannen 105,000 shares
Ronald I. Davis 105,000 shares
Stephen Rubin 105,000 shares
Daniel S. Zittnan 150,000 shares
Ronald J. Carr 150,000 shares
Howard Schickler 75,000 shares
Karen B. Daniels 75,000 shares
The options are exercisable at $2.75 per share. The options of the
officers vest over two years (50% each year) and expire six years from the date
of grant. The directors' options vest immediately and expire six years from the
date of grant.
On February 14, 2000, the Board of Directors approved the issuance
of stock options to the following individuals to purchase the following numbers
of shares of common stock, as awards under our Stock Option Plan, subject to
stockholder approval:
Options to Purchase
-------------------
James N. Jennings 50,000 shares
Glenn D. Seaburg 50,000 shares
THE OPTIONS ARE EXERCISABLE AT $2.875 PER SHARE. THE OPTIONS OF THESE OFFICERS
VEST OVER THREE YEARS (ONE THIRD EACH YEAR) AND EXPIRE SIX YEARS FROM THE DATE
OF GRANT.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
- -23-
<PAGE> 25
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE
OFFICERS AND PRINCIPAL HOLDERS
The following table lists certain information regarding the beneficial
owners of our common stock as of April 13, 2000, which includes: (i) each person
known to us to beneficially own more than five percent of the outstanding shares
of our common stock; (ii) each of our company's directors; (iii) the Named
Executive Officers; (iv) each selling stockholder; and (v) all of our company's
directors and executive officers as a group. We believe that except as noted
each person or entity named below has sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by each
holder, subject to community property laws where applicable. Some of the listed
holders of common stock who hold their shares in street name may have already
sold their shares as of the effective date of this prospectus.
Beneficial Ownership
Name of Shares Percent(1)
---- --------- ----------
Number
TJS Partners, L.P.(2)
115 East Putnam Avenue
Greenwich, CT 06830 13,635,900 65.45%
Ronald I. Davis(3)
c/o Security Associates
International, Inc.
2101 S. Arlington Heights Road
Arlington Heights, Illinois 60005 1,014,695 4.85%
James S. Brannen(4)
c/o Security Associates
International, Inc.
2101 S. Arlington Heights Road
Arlington Heights, Illinois 60005 643,278 3.08%
Stephen Rubin(5)
c/o Security Associates
International, Inc.
2101 S. Arlington Heights Road
Arlington Heights, Illinois 60005 501,198 2.40%
Daniel S. Zittnan(6)
c/o Security Associates
International, Inc.
2101 S. Arlington Heights Road
Arlington Heights, Illinois 60005 138,349 *
- -24-
<PAGE> 26
Ronald J. Carr(7)
c/o Security Associates
International, Inc.
2101 S. Arlington Heights Road
Arlington Heights, Illinois 60005 135,160 *
Thomas J. Salvatore(8)
c/o TJS Partners, L.P.
155 E. Putnam Avenue
Greenwich, CT 06830 13,660,900 65.49%
Douglas Oberlander(9)
10225 N. Knoxville Avenue
Peoria, Illinois 61615 144,474 *
Michael B. Jones(10)
c/o ProFinance Associates, Inc.
6540 Lusk Boulevard, Suite C-240
San Diego, CA 92121 91,000 *
All Executive Officers and Directors
as a group (12 persons)(11) 16,474,344 79.07%
* = less than 1%.
(1) Applicable percentage of ownership as of April 13, 2000, is based upon
20,833,942 shares of common stock outstanding (including 13,635,900 shares
issuable upon conversion of outstanding shares of convertible preferred
stock). Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission, and unless otherwise noted
includes voting and investment power with respect to the shares shown as
beneficially owned.
(2) Consists of 136,359 shares of Series A Convertible Preferred Stock. Each
share of Series A convertible preferred stock is convertible into and has
the voting rights of 100 shares of common stock. TJS is the only holder of
convertible preferred stock.
(3) Includes 944,695 shares owned by Mr. Davis and J, S & R Ltd., L.P. Also
includes 70,000 shares that may be acquired within sixty days upon
exercise of options. Excludes 5,337 shares owned by Beverly Davis, Mr.
Davis' wife, 5,200 shares owned by Scott Davis, Mr. Davis' son, 5,000
shares owned by Deborah Davis, Scott's wife, 10,000 shares owned by Ethan
Davis, Mr. Davis' grandson, 10,000 shares owned by Benjamin Davis, Mr.
Davis' grandson, 2,500 shares owned by Emma Davis, Mr. Davis'
granddaughter, and 16,801 shares owned by Ann Davis, Mr. Davis' sister, as
to which Mr. Davis disclaims beneficial ownership.
(4) Includes 573,278 shares owned by Mr. Brannen and a family limited
partnership, and 70,000 shares that may be acquired within sixty days upon
exercise of options Excludes 7,580 shares owned by Martha A. Brannen, Mr.
Brannen's wife, 10,000 shares owned by Craig Brannen, 10,000 shares owned
by Sarah B. Ozee and 10,000 shares owned
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<PAGE> 27
by Peter Brannen, Mr. Brannen's children, as to which Mr. Brannen
disclaims beneficial ownership.
(5) Includes 431,198 shares owned by Mr. Rubin, and 70,000 shares that may be
acquired within sixty days upon exercise of options. Excludes 5,600 shares
owned by Jamie Rubin, Mr. Rubin's son, as to which Mr. Rubin disclaims
beneficial ownership.
(6) Includes 38,349 shares owned by Mr. Zittnan, and 100,000 shares that may
be acquired within sixty days upon exercise of options.
(7) Includes 35,160 shares owned by Mr. Carr, and 100,000 shares that may be
acquired within sixty days upon exercise of options.
(8) Consists of 136,359 shares of convertible preferred stock owned by TJS.
Mr. Salvatore controls voting and disposition of these shares as the
Managing Partner of TJS. Also includes 25,000 shares that may be purchased
personally by Mr. Salvatore within sixty days upon exercise of options.
This option is subject to stockholder approval at our Annual Meeting.
(9) Includes 94,474 shares owned by Mr. Oberlander, and 50,000 shares that may
be acquired within sixty days upon exercise of options. Of these options,
options to purchase 25,000 shares are subject to stockholder approval at
our Annual Meeting.
(10) Includes 6,000 shares owned by Mr. Jones; and 85,000 shares of common
stock that may be acquired within sixty days upon exercise of options. Of
these options, options to purchase 25,000 shares are held by a family
trust and options to purchase 25,000 shares are subject to stockholder
approval at our Annual Meeting.
(11) Includes 670,000 shares which may be acquired within sixty days upon the
exercise of options.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
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<PAGE> 28
The following table presents certain information regarding the
beneficial ownership of Series A Convertible Preferred Stock as of April 13,
2000 by: (a) each person known by us to beneficially own more than five percent
of the outstanding shares of Series A Convertible Preferred Stock; (b) each of
our Directors; (c) each of the Named Executive Officers; and (d) all Directors
and officers as a group. We believe that each person named below has sole voting
and investment power with respect to all shares of Series A Convertible
Preferred Stock shown as beneficially owned by them, subject to community
property laws where applicable. TJS Partners, L.P. and Thomas J. Salvatore are
the only beneficial owners of Series A Convertible Preferred Stock.
BENEFICIAL OWNERSHIP
----------------------------
NUMBER OF
NAME SHARES PERCENT(1)
---- ------ ----------
TJS Partners, L.P.(2)
115 East Putnam Avenue
Greenwich, CT 06830 136,359 100%
Thomas J. Salvatore(3)
c/o TJS Partners, L.P.
115 East Putnam Avenue
Greenwich, CT 06830 136,359 100%
All Executive Officers and Directors as a group
(10 persons)
136,359 100%
1) Applicable percentage of ownership as of April 13, 2000 is based upon
136,359 shares of Series A Convertible Preferred Stock outstanding.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and unless otherwise noted includes
voting and investment power with respect to the shares shown as
beneficially owned.
2) Consists of 136,359 shares of Series A Convertible Preferred Stock.
Each share of convertible preferred stock is convertible into and has
the voting rights of 100 shares of common stock. The total voting power
of all securities owned by a holder of Series A Convertible Preferred
Stock is limited to a maximum of 45% of the total number of votes
eligible to vote on a matter submitted to our stockholders. TJS is the
only holder of Series A Convertible Preferred Stock.
3) Consists of 136,359 shares of Series A Convertible Preferred Stock
owned by TJS, Mr. Salvatore controls voting and disposition of these
shares as the Managing General
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<PAGE> 29
Partner of TJS.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our Directors, executive officers and any persons who beneficially own
more than ten percent of our common stock, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of common stock. Such persons are required by the Securities and
Exchange Commission regulations to furnish our company with copies of all
Section 16(a) forms they file.
To our knowledge, based solely on review of the copies of such reports
and written representations received by us, during the year ended December 31,
1999, all such Section 16(a) filing requirements were complied with.
STOCKHOLDER PROPOSALS FOR THE 1999 PROXY STATEMENT
Any stockholder satisfying the Securities and Exchange Commission's
requirements and wishing to submit a proposal to be included in the Proxy
Statement for the 2000 Annual Meeting of Stockholders should submit the proposal
in writing to: Howard Schickler, Secretary, Security Associates International,
Inc., 2101 South Arlington Heights Road, Suite 100, Arlington Heights, Illinois
60005. We must receive a proposal by January 30, 2001 in order to consider it
for inclusion in the Proxy Statement for the 2001 Annual Meeting of
Stockholders.
VOTING PROCEDURES
Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum at the Annual Meeting of
Stockholders. With regard to the election of Directors, votes may be cast in
favor or withheld. Votes that are withheld and broker non-votes will be excluded
entirely from the vote and will have no effect on the outcome.
OTHER INFORMATION
Our 1999 Annual Report to Stockholders, which includes a copy of our
Annual Report on Form 10-KSB/A for the fiscal year 1999, is being mailed to all
stockholders of record and accompanies this Proxy Statement. Additional copies
of the Annual Report on Form 10-KSB/A as filed with the Securities and Exchange
Commission (excluding exhibits) will be furnished to you, without charge, by
writing to John Aneralla, c/o Buttonwood Advisory Group, Inc., P.O. Box 2158,
Huntersville, North Carolina 28070.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, our independent public accountants, has examined
our financial statements for the fiscal year ended December 31, 1999. We expect
a representative to be available at the Annual Meeting to respond to appropriate
questions from stockholders.
EXPENSES OF SOLICITATION
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<PAGE> 30
We will pay all expenses in connection with the solicitation of
proxies. Solicitation may be made personally, or by telephone, telegraph or
mail, by one or more of our employees, who will receive no additional
compensation for such activities. In addition, we may engage the services of a
professional proxy solicitation firm to assist in the solicitation of proxies
and will pay the fees and expenses charged them. We will reimburse brokerage
firms and other custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred in forwarding copies of solicitation materials
to beneficial owners of our common stock and convertible preferred stock held by
such persons on April 7, 2000.
The above Notice of Annual Meeting and Proxy Statement are sent by
order of the Board of Directors.
/s/ James S. Brannen
JAMES S. BRANNEN
President and Chief Executive Officer
Arlington Heights, Illinois
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<PAGE> 31
ANNEX A
RESOLUTION AMENDING THE
SECURITY ASSOCIATES INTERNATIONAL, INC. STOCK OPTION PLAN
WHEREAS, the Directors deem it to be in the Corporation's best interests to
authorize the issuance of additional options to purchase the Corporation's
Common Stock under the Security Associates International, Inc. Stock Option Plan
(Stock Option Plan),
NOW THEREFORE BE IT RESOLVED, that options to purchase up to an additional one
million (1,000,000) shares of Common Stock are hereby authorized for issuance
under the Stock Option Plan.
<PAGE> 32
PROXY FOR ANNUAL MEETING
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SECURITY ASSOCIATES INTERNATIONAL, INC.
2101 SOUTH ARLINGTON HEIGHTS ROAD
SUITE 100
ARLINGTON HEIGHTS, ILLINOIS 60005
I hereby appoint Howard Schickler as Proxy, with the power to appoint
his substitute, and hereby authorize him to represent and to vote, as designated
below, all the shares of common stock and convertible preferred stock of
Security Associates International, Inc. held of record by me on April 7, 2000,
at the Annual Meeting of Stockholders to be held on May 23, 2000, or any
adjournment thereof.
1. ELECTION OF DIRECTORS (Mark only one box)
FOR [ ] AGAINST [ ]
All nominees listed below All nominees listed below
(except as marked to the (except as marked to the
contrary below) contrary below)
Ronald I. Davis; James S. Brannen; Thomas J. Salvatore; Douglas Oberlander;
Michael B. Jones
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list above.)
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS OUR
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDED DECEMBER 31,
2000 (Mark only one box)
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. PROPOSAL TO APPROVE THE AMENDMENT TO THE SECURITY ASSOCIATES
INTERNATIONAL, INC. STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK AVAILABLE UNDER THE PLAN FROM 1,800,000 SHARES TO
2,800,000 SHARES (Mark only one box)
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In his discretion, the Proxy is authorized to vote upon such other
business as may properly come before the Annual Meeting or any
adjournment thereof.
This Proxy when properly executed will be voted in the manner directed by you.
If no direction is made, this Proxy will be voted FOR Proposals 1, 2 and 3.
Please sign exactly as name appears below.
- ----------------------------------------
(Affix Mailing Label Here)
Date: , 2000
--------------------------------
<PAGE> 33
PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE
PROMPTLY.
When shares are held by joint tenants, both should sign. When signing
as executor, trustee, guardian or in another representative capacity, please
give your full title in that capacity. If a corporation, please sign in full
corporate name by the president or other authorized officer. If a limited
liability company, please sign in the name of the company by an authorized
person. If a partnership, please sign in partnership name by an authorized
person.
- -----------------------------------------
Signature of Stockholder
- -----------------------------------------
Signature, if held jointly
If signing as attorney, executor, administrator, trustee or guardian or
on behalf of an entity (corporation, partnership, etc.), please indicate office
or capacity.
Title:
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