<PAGE> 1
SCHEDULE 14A INFORMATION
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SENSORMATIC ELECTRONICS CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
SENSORMATIC ELECTRONICS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 14, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
SENSORMATIC ELECTRONICS CORPORATION, a Delaware corporation, will be held at the
US Grant Hotel, 326 Broadway, San Diego, California 92101-9709, on November 14,
1997, at 10 A.M., local time, for the following purposes:
1. To elect three directors to serve for a term of three years
and until their successors are elected and qualified; and
2. To transact such other business as may be properly brought
before the meeting.
Only stockholders of record at the close of business on September
22, 1997, will be entitled to notice of, and to vote at, the meeting and any
adjournment thereof.
THE BOARD OF DIRECTORS OF SENSORMATIC ELECTRONICS CORPORATION
HOPES THAT YOU WILL FIND IT CONVENIENT TO ATTEND THE MEETING IN PERSON. IN ANY
EVENT, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY TO MAKE SURE THAT
YOUR SHARES ARE REPRESENTED AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY
VOTE YOUR STOCK PERSONALLY EVEN THOUGH YOU HAVE SENT IN YOUR PROXY.
By Order of the Board of Directors,
WALTER A. ENGDAHL
Secretary
Boca Raton, Florida
September 29, 1997
<PAGE> 3
SENSORMATIC ELECTRONICS CORPORATION
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Sensormatic Electronics Corporation, a
Delaware corporation (the "Company"), of proxies to be voted at the Annual
Meeting of Stockholders of the Company to be held at the US Grant Hotel, 326
Broadway, San Diego, California 92101-9709, on November 14, 1997, at 10 A.M.,
local time, or at any adjournment or adjournments thereof. Only stockholders of
record at the close of business on September 22, 1997, shall be entitled to
notice of, and to vote at, the meeting. Shares represented by duly executed
proxies received by the Company will be voted in accordance with the
instructions contained therein and, in the absence of specific instructions,
will be voted for the election as directors of the persons who have been
nominated by the Board of Directors and in accordance with the judgment of the
person or persons voting the proxies on any other matter that may be properly
brought before the meeting. The execution of a proxy will in no way affect a
stockholder's right to attend the Annual Meeting and to vote in person. Any
proxy executed and returned by a stockholder may be revoked at any time
thereafter except as to any matter or matters upon which, prior to such
revocation, a vote shall have been cast pursuant to the authority conferred by
such proxy.
The election of directors requires a plurality of the votes cast.
For purposes of determining the number of votes cast with respect to a
particular matter, only those cast "for" or "against" are included. Shares
represented by proxies marked to withhold authority to vote, and shares
represented by proxies that indicate that the broker or nominee stockholder
thereof does not have discretionary authority to vote them, will be counted only
to determine the existence of a quorum at the Annual Meeting.
This Proxy Statement and the accompanying proxy are being sent on
or about September 29, 1997, to stockholders entitled to vote at the Annual
Meeting of Stockholders. The cost of solicitation of the Company proxies will be
borne by the Company. In addition to the use of the mails, proxy solicitations
may be made by telephone, telecopier and personal interview by officers,
directors and employees of the Company. The Company will, upon request,
reimburse brokerage houses and persons holding shares in their names or in the
names of their nominees for their reasonable expenses in sending soliciting
material to their principals. The Company's executive offices are located at 951
Yamato Road, Boca Raton, Florida, 33431-4425.
<PAGE> 4
VOTING SECURITIES AND SECURITY OWNERSHIP
Only stockholders of record at the close of business on September
22, 1997, will be entitled to vote at the Annual Meeting of Stockholders and any
adjournment thereof. At the close of business on September 22, 1997, there were
outstanding 74,288,369 shares of Common Stock, $.01 par value, of the Company.
Each of such shares is entitled to one vote. There was no other class of voting
securities outstanding at that date.
To the knowledge of the Company, as of September 22, 1997, no
person beneficially owned more than 5% of the outstanding shares of Common Stock
of the Company except as set forth in the table below. Each named person
beneficially owned, as of the dates set forth below, the number of shares of
Common Stock listed opposite its name, and, unless otherwise noted below, each
such person had sole voting and investment power over such shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF PERCENTAGE
OF BENEFICIAL OWNER SHARES OWNED OF CLASS
------------------- ------------ --------
<S> <C> <C> <C>
J.P. Morgan & Co. Incorporated 7,502,000 (1) 10.1%
60 Wall Street
New York, New York 10260
State of Wisconsin Investment Board 7,094,000 (1) 9.6%
P.O. Box 7842
Madison, Wisconsin 53702
Edward C. Johnson 3d, 5,466,000 (2) 7.4%
Abigail P. Johnson and FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109
The Capital Group Companies, Inc. 4,633,000 (1) 6.3%
and Capital Guardian Trust Company
333 South Hope Street
Los Angeles, California 90071
Quantum Industrial Partners LDC 4,297,200 (3) 5.8%
Kaya Flamboyan 9
Curacao, Netherlands Antilles
QIH Management Investor, L.P.
QIH Management, Inc.
George Soros
Soros Fund Management LLC
Purnendu Chatterjee
Chatterjee Fund Management, L.P.
Winston Partners, L.P.
Stanley F. Druckenmiller
888 Seventh Avenue
New York, New York 10106
</TABLE>
(1) Reflects shares beneficially owned as of June 30, 1997, according to a
statement on Form 13F.
(2) Reflects shares beneficially owned as of June 30, 1997, according to a
statement on Form 13F. Edward C. Johnson 3d, Abigail P. Johnson, members
of their family and associated trusts may be deemed to form a
controlling group with respect to FMR Corp.
-2-
<PAGE> 5
(3) Reflects shares beneficially owned as of June 30, 1997, according to a
statement on Form 13F. As set forth in a statement on Schedule 13D,
dated January 1, 1997, Quantum Industrial Partners LDC ("Quantum
Industrial"), QIH Management Investor, L.P., QIH Management, Inc., Soros
Fund Management LLC, George Soros, Stanley F. Druckenmiller and Purnendu
Chatterjee beneficially owned 4,297,200 shares held by Quantum
Industrial and had shared voting and investment power over all such
shares. Mr. Soros also held 1,388,850 shares over which he had sole
voting and investment power; he also held 10,750 shares for the Open
Society Institute, over which he occasionally exercised voting power and
of which he was deemed the beneficial owner. Dr. Chatterjee is the
beneficial owner of 537,458 shares, which include 47,454 shares held
directly by Dr. Chatterjee, 238,404 shares held by Chatterjee Fund
Management, L.P. ("CFM"), of which he is the sole general partner, and
251,600 shares held by Winston Partners, L.P., of which CFM is the sole
general partner.
- - ------------------------------------------
The following table sets forth information as to the Common Stock
of the Company beneficially owned as of September 22, 1997, by each director,
nominee for director, each person named in the Summary Compensation Table under
Executive Compensation, and by all directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP COMMON STOCK
- - ------------------------ --------- ------------
<S> <C> <C> <C>
Ronald G. Assaf.............................. 1,580,118 (1) 2.1%
Thomas V. Buffett............................ 52,675 (2) *
Timothy P. Hartman........................... 100,832 (3) *
Wayland R. Hicks............................. 5,000 *
Jerry T. Kendall............................. 72,499 (4) *
Jerome M. LeWine............................. 161,600 (5) *
James E. Lineberger.......................... 753,283 (6) 1.0%
Dr. Arthur G. Milnes......................... 41,000 (7)(14) *
J. Richard Munro............................. 5,000 *
Garrett E. Pierce............................ 86,607 (8) *
Terry W. Price............................... 64,862 (9) *
John T. Ray, Jr.............................. 46,000 (10)(14) *
Robert A. Vanourek........................... 374,518 (11) *
Gerd Witter.................................. 54,680 (12) *
All directors and executive officers as a
group...................................... 3,531,593 (13)(14) 4.6%
</TABLE>
- - ------------------------------------------
* Less than 1%.
(1) Includes 1,167,833 shares issuable upon exercise of options. Also
includes 65,348 shares allocated to Mr. Assaf's account under the
Employee Stock Ownership Plan (the "ESOP") through June 30, 1997, over
which Mr. Assaf has sole voting power. Does not include 22,104 shares
held by Mrs. Assaf, and 3,000 shares held by trusts for the benefit of
Mr. Assaf's children, as to all of which Mr. Assaf disclaims beneficial
ownership.
(2) Includes 40,000 shares issuable upon exercise of options.
(3) Includes 15,832 shares issuable upon exercise of options.
(4) Includes 56,666 shares issuable upon exercise of options. Also includes
347 shares allocated to Mr. Kendall's account under the ESOP through
June 30, 1997, over which Mr. Kendall has sole voting power.
-3-
<PAGE> 6
(5) Includes 155,000 shares issuable upon exercise of options.
(6) Includes 246,666 shares issuable upon exercise of options.
(7) Includes 35,000 shares issuable upon exercise of options.
(8) Includes 66,666 shares issuable upon exercise of options. Also includes
42 shares allocated to Mr. Pierce's account under the ESOP through June
30, 1997, over which Mr. Pierce has sole voting power.
(9) Includes 46,666 shares issuable upon exercise of options. Also includes
643 shares allocated to Mr. Price's account under the ESOP through June
30, 1997, over which Mr. Price has sole voting power.
(10) Includes 35,000 shares issuable upon exercise of options.
(11) Includes 300,000 shares issuable upon exercise of options. Also includes
73 shares allocated to Mr. Vanourek's account under the ESOP through June
30, 1997, over which Mr. Vanourek has sole voting power.
(12) Includes 31,666 shares issuable upon exercise of options.
(13) Includes 2,264,161 shares issuable upon exercise of options and 70,877
shares allocated to executive officers under the ESOP through June 30,
1997, over which executive officers exercise sole voting power.
(14) Does not include a total of 11,538 shares (less than 1% of the Company's
outstanding shares of Common Stock) held under the ESOP through June 30,
1997, and unallocated, which are voted by the trustee of the ESOP trust
fund in accordance with the instructions of the ESOP Plan Committee,
consisting of two directors, Dr. Milnes and Mr. Ray.
For the purpose of the foregoing table, each of the directors and
executive officers is deemed to be the beneficial owner of shares which may be
acquired by him within 60 days through the exercise of options, if any, and such
shares are deemed to be outstanding for the purpose of computing the percentage
of the Company's Common Stock beneficially owned by him and by the directors and
executive officers as a group. Such shares, however, are not deemed to be
outstanding for the purpose of computing the percentage of the Company's Common
Stock beneficially owned by any other person.
Each of the persons named in the above table as beneficially
owning the shares set forth opposite his name has sole voting power (as to
outstanding shares) and sole investment power over such shares, except as
otherwise indicated.
ELECTION OF DIRECTORS
Unless otherwise specified, shares represented by the enclosed
proxy will be voted for the election of Timothy P. Hartman, J. Richard Munro and
Robert A. Vanourek, who have been nominated by the Board of Directors as
directors to serve until the Annual Meeting of Stockholders in 2000 and until
their successors are elected and qualified. Each of the nominees is now a
director of the Company. Directors shall be elected by a plurality of the votes
cast, in person or by proxy, at the meeting.
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<PAGE> 7
The Board of Directors is divided into three classes. One class
will stand for election for a three-year term at the Annual Meeting of
Stockholders on November 14, 1997. The terms of office of the other two classes
of continuing directors do not expire until the Annual Meetings of Stockholders
in 1998 and 1999, respectively. The names of, and certain information
concerning, the nominees and such other directors are set forth below:
<TABLE>
<CAPTION>
FIRST YEAR
BECAME
AGE DIRECTOR OFFICES
NAME --- -------- -------
<S> <C> <C> <C>
Nominees to serve until
Annual Meeting of Stockholders in 2000:
TIMOTHY P. HARTMAN(b)........... 58 1995 Director
J. RICHARD MUNRO(c)............. 66 1997 Director
ROBERT A. VANOUREK(a)........... 55 1995 President, Chief Executive
Officer and Director
Continuing Directors to serve until
Annual Meeting of Stockholders in 1998:
THOMAS V. BUFFETT(b)(c)(d)...... 61 1992 Director
JAMES E. LINEBERGER(a)(b)(c).... 60 1968 Director
JOHN T. RAY, JR.(c)(d).......... 59 1989 Director
Continuing Directors to serve until
Annual Meeting of Stockholders in 1999:
RONALD G. ASSAF(a).............. 62 1966 Director
WAYLAND R. HICKS(e)............. 54 1997 Director
</TABLE>
- - ------------------------------------------
<TABLE>
<S> <C>
(a) Member of the Executive Committee (d) Member of the Stock Incentive Plan
(b) Member of the Audit Committee Committee
(c) Member of the Governance Committee (e) Member of the Technology Committee
</TABLE>
Ronald G. Assaf, a founder of the Company, has been Chairman of
the Board of Directors of the Company since October 1971 and served as President
and Chief Executive Officer of the Company from 1974 to January 1986. In January
1988, Mr. Assaf was appointed Co-Chief Executive Officer and in July 1988 was
reappointed to the positions of President and Chief Executive Officer. In
October 1995, Mr. Assaf relinquished the title of President when Robert A.
Vanourek was appointed President and Chief Operating Officer of the Company. In
August 1996, Mr. Assaf retired as Chief Executive Officer of the Company. He
continues to serve as Chairman of the Board. Mr. Assaf is also a director of
Hilite Industries Inc. and Senvest Capital.
Thomas V. Buffett is President of Clipper Investments, a private
firm that invests in, and provides consulting services to, the alarm industry.
He served as Chairman and Chief Executive Officer of Automated Security
(Holdings) PLC, a United Kingdom-based international company specializing in
electronic security, from 1974 through October 1994.
Timothy P. Hartman was appointed a Director of the Company in
July 1995 by the Board of Directors. Mr. Hartman was Chairman of NationsBank of
Texas until his retirement in June 1996, and also was a director and Vice
Chairman of its parent corporation until he retired in 1994. Before joining the
NationsBank organization in 1982, Mr. Hartman was the Chief Financial Officer of
Baldwin-United Corporation, a diversified financial services company, with which
he was associated from 1963 through 1981.
Wayland R. Hicks was appointed a Director of the Company in May
1997 by the Board of Directors. From February 1996 until his retirement in March
1997, Mr. Hicks was the
-5-
<PAGE> 8
President and Chief Executive Officer of Indigo, N.V., a company engaged in the
high-speed digital offset color printing business. Prior to joining Indigo,
N.V., Mr. Hicks served as the Vice Chairman and Chief Executive Officer of
Nextel Communications, a wireless communications company which he joined in
1994. Mr. Hicks had been a member of the Xerox Corp. Inc. management team for 28
years before joining Nextel and was Xerox's Executive Vice President of
Operations. Mr. Hicks also serves on the Board of Directors of Maytag
Corporation, Katun Corporation, Tektronix Inc. and Perdue Farms.
James E. Lineberger held the office of Chairman of the Executive
Committee of the Company from 1974 through 1996. From January 1988 to July 1988,
Mr. Lineberger served as Co-Chief Executive Officer of the Company. He has been
a partner of Lineberger & Co., LLC and its predecessors, private investment
firms, since 1969. Additionally, Mr. Lineberger serves as Chairman of the Board
of Directors of Hilite Industries Inc. and as a director of Wray-Tech
Instruments, Inc.
J. Richard Munro was appointed a Director of the Company in May
1997 by the Board of Directors. Mr. Munro had previously served as the
Co-Chairman of the Board and Co-Chief Executive Officer of Time Warner Inc., a
global media company, from July 1989, and was Chairman of the Board and Chief
Executive Officer of Time Inc. from September 1986 through July 1989. From
October 1980 to September 1986, Mr. Munro served as President and Chief
Executive Officer of Time Inc. Mr. Munro is the Chairman of the Board of
Genentech, Inc., a biotechnology firm, and a member of the Board of Directors of
Kmart Corporation, Kellogg Company and Mobil Corporation.
John T. Ray, Jr. has served since June 1985 as the Senior Vice
President and General Manager of the United States Adhesives, Sealants and
Coatings Division of H.B. Fuller Company, expanded in 1994 to include Mexico and
Canada and now known as North American ASC Group. Mr. Ray is also the Chairman
of EFTEC North America, L.L.C. and of Fiber Resin Corp.
Robert A. Vanourek joined the Company in October 1995 as its
President and Chief Operating Officer. In August 1996 Mr. Vanourek was appointed
Chief Executive Officer of the Company. From 1992 until he joined the Company,
Mr. Vanourek was President and Chief Executive Officer of Recognition
International, Inc. ("Recognition"), a provider of document processing hardware,
software and services worldwide, which merged with Banctec, Inc. in October
1995. He acted as Co-Chief Executive Officer of Recognition from 1989 to 1992.
Before joining Recognition, Mr. Vanourek was a Group Vice President of Pitney
Bowes, Inc., with which he had been affiliated since 1981, and prior to that, he
had positions with Avery Dennison Corporation and Couroc Corporation.
Jerome M. LeWine and Arthur G. Milnes are also members of the
Board of Directors. Dr. Milnes will be retiring from the Board in October 1997.
Mr. LeWine will not be serving as a director beyond the expiration of his
current term at the Annual Meeting of Stockholders in 1997. Mr. LeWine is
currently a member of the Company's Executive and Technology Committees. Dr.
Milnes is a member of the Audit, Stock Incentive Plan and Technology Committees.
Mr. LeWine has been a partner of the New York City law firm of Christy & Viener
for more than five years and Dr. Milnes is professor emeritus of electrical and
computer engineering at Carnegie-Mellon University, Pittsburgh, Pennsylvania,
where he has been a member of the faculty for more than five years.
None of the directors has any family relationship with any other
director or with any executive officer of the Company.
The Company has no reason to believe that the nominees will be
unable or unwilling to serve as directors, if elected. If, however, the nominees
should decline or be unable to act as directors, the shares represented by the
enclosed proxy will be voted for such other person or persons as may be
nominated by the Board of Directors.
-6-
<PAGE> 9
Committees and Meetings
The Board of Directors has standing Executive, Audit, Governance,
Stock Incentive Plan and Technology Committees. The Company had a standing
Finance Committee until November 1996, when its responsibilities were assumed by
the Audit Committee, and a standing Compensation Committee until September 1996,
when its responsibilities were assumed by the Governance Committee.
The Audit Committee reviews the proposed scope of audit and
non-audit services and the fees proposed to be charged for such services,
reviews the reports and receives comments and recommendations from the Company's
internal audit function and the Company's independent auditors following
completion of the annual audit, and reviews with such auditors and management
the Company's accounting policies and the adequacy of the Company's internal
accounting controls. The Audit Committee also deals with special matters
relating to the Company's accounting practices and financial statements brought
to its attention by the Company's internal auditors, management or the Company's
independent auditors. In November 1996 the Audit Committee assumed the duties of
the Finance Committee, which had been established early in fiscal 1996 to
evaluate and provide counsel on proposals for short- and long-term financing for
the Company and other financial transactions. The Audit Committee met four times
during the 1997 fiscal year.
The Executive Committee exercises the authority of the Board on
such matters as are delegated to it by the Board of Directors from time to time.
The Executive Committee met twice during the 1997 fiscal year.
The Governance Committee was formed in September 1996 to address
executive and director compensation and other issues of corporate governance.
Among other things, the Committee evaluates the performance of the Company's
Chief Executive Officer and other executive officers and is responsible for
implementing the Company's cash compensation policies and determining the
salaries, bonuses and certain other benefits of executive officers of the
Company. It also from time to time makes recommendations to the Board of
Directors regarding other compensation matters. The Governance Committee also
reviews the composition of the Board, evaluating its performance and considering
the qualifications of prospective nominees to serve as directors. Stockholders
may recommend nominees for consideration by the Governance Committee by
submitting such recommendations, in writing, to the Committee in care of the
Secretary of the Company. The Governance Committee (including, until September
1996, the Compensation Committee) met six times during the 1997 fiscal year.
The Stock Incentive Plan Committee administers the Company's 1995
Stock Incentive Plan (the "1995 Plan"), as well as the Company's 1989 Stock
Incentive Plan (the "1989 Plan") with respect to options outstanding thereunder
(no new options have been granted under the 1989 Plan since the adoption of the
1995 Plan). Administration of the 1995 Plan includes the granting of awards to
officers, key employees and directors who are eligible to participate in the
1995 Plan. The Stock Incentive Plan Committee met eight times during the 1997
fiscal year.
The Technology Committee reviews the Company's research and
development projects and technological developments on behalf of the Board of
Directors and advises the Board on the significance and potential of such
developments. The Technology Committee met three times during the 1997 fiscal
year.
The Board of Directors held eight meetings during the 1997 fiscal
year. No director of the Company during the last fiscal year attended fewer than
90% of the aggregate number of meetings of the Company's Board of Directors and
of all committees of the Board of Directors on which he served.
-7-
<PAGE> 10
Compensation of Directors
Beginning in fiscal 1997, the directors of the Company (other
than Mr. Assaf and Mr. Vanourek) receive annual compensation for their services
based on a $30,000 per fiscal year retainer and an additional $3,000 for each
meeting of the Board of Directors (other than telephonic meetings) attended.
During fiscal 1997, Mr. Hartman received an additional $20,000 for service as
the chairman of the special Litigation Committee of the Board of Directors. Mr.
Lineberger, who served as an officer of the Company until the end of calendar
1996, received a total of $145,481 as compensation in fiscal 1997 for services
as a director, Chairman of the Executive Committee and a member of the Finance
Committee (whose responsibilities have now been assumed by the Audit Committee).
Mr. Lineberger also participated in various benefit plans for executive officers
of the Company prior to his retirement as an officer of the Company. Under the
Company's Executive Salary Continuation Plan, which is described below in Note 8
to the "Summary Compensation Table," Mr. Lineberger is receiving annual
retirement benefits of $130,000.
In addition, the directors of the Company participate in either
the Directors Stock Option Plan (the "Directors Plan") or the 1995 Plan. The
Directors Plan provides for annual, non-discretionary grants of ten-year options
to purchase 7,500 shares of Common Stock (after an initial grant to new
directors participating in the Directors Plan of an option to purchase 20,000
shares) at an exercise price per share equal to the fair market value of a share
of Common Stock on the date of grant, and exercisable on a cumulative basis in
three equal annual installments. In fiscal 1997, Dr. Milnes, Mr. Ray, Mr.
Buffett and Mr. Hartman each received options to purchase 7,500 shares of Common
Stock under the Directors Plan. Messrs. Hicks and Munro each received an initial
grant of an option to purchase 20,000 shares when they became eligible to
participate in the Directors Plan in May 1997. Messrs. Lineberger and LeWine
each received options to purchase 7,500 shares of Common Stock under the 1995
Plan. Messrs. Assaf and Vanourek also participated in the 1995 Plan, as
described below under "Executive Compensation."
In 1989, the Company adopted a Board of Directors Retirement Plan
for non-officer directors. In fiscal 1997, the directors decided to discontinue
the Plan for the benefit of non-employee directors, although benefits for the
existing participants will be paid in accordance with the terms of the Plan. The
Plan provides for monthly payments over 15 years beginning upon the later of the
attainment of age 60 or retirement from the Company, or upon the director's
earlier death. Benefits under the Plan are 50% vested after five years of
service and are vested an additional 10% for each year of service thereafter.
Benefits are payable to the director's designated beneficiary or estate in the
event of death. If the director dies while in office and prior to attaining the
age of 60, the director's vested interest would be deemed to be equal to that
which would have accrued had he remained in office until attaining that age.
Annual benefits have been fixed by the Board of Directors or a committee thereof
at $50,000 for Mr. LeWine, $40,000 for Mr. Buffett and $25,000 for each of Dr.
Milnes, Mr. Ray, Mr. Hartman and Mr. Lineberger.
EXECUTIVE COMPENSATION
REPORT OF THE GOVERNANCE AND STOCK INCENTIVE PLAN COMMITTEES
The Governance Committee of the Board of Directors has
responsibility for, among other things, periodically reviewing and determining
the cash compensation and certain other non-equity-based benefits of the
Company's executive officers. The Stock Incentive Plan Committee of the Board
administers the Company's 1995 Plan and grants awards thereunder to the
Company's executive officers, key employees and participating directors,
including stock-based long-term incentive compensation under the Company's
Long-Term Incentive Programs ("LTIPs"). Until September 1996, the Compensation
Committee of the Board (consisting of Messrs. Ray and LeWine and Dr. Milnes)
implemented the Company's cash and non-equity-based compensation programs. At
that time, the Governance Committee assumed the responsibilities of
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<PAGE> 11
the Compensation Committee, and thereafter the Governance Committee and the
Stock Incentive Plan Committee implemented the Company's compensation programs.
Mr. Munro became a member of the Governance Committee in September 1997.
In fiscal 1997, these Committees received from the Company's
Chief Executive Officer recommendations with respect to compensation of the
Company's other executive officers and met with him to evaluate such executives'
performance and, at times, to discuss the bases for his recommendations. The
Committees met without the Chief Executive Officer to evaluate his performance
and to determine the compensation of all executive officers.
The members of the Governance Committee and the Stock Incentive
Plan Committee during fiscal 1997 provide the following report, each being
responsible for the portions thereof which refer to them or their separate
functions.
Compensation Policy
The Company's executive compensation programs are designed to
attract and retain qualified leaders and motivate them to achieve the Company's
short- and long-term business objectives. The Company believes that the key to
achieving such goals is to provide compensation that is competitive with the
compensation packages provided by comparable companies and of which a high
proportion is "at risk" for performance, in the form of annual incentive bonuses
and long-term stock-based incentives.
Fiscal 1997 Performance
Although fiscal 1997 was difficult for the Company, it was also a
year marked by significant progress in the implementation of its transformation
strategy. In fiscal 1996, the Company began a substantial restructuring and
reorganization of its business units and product lines, with the goal of
reducing costs, increasing efficiencies and improving gross margins, which
program continued through fiscal 1997. In response to challenges that arose
during the year, the Company took aggressive steps to cut excess costs in its
European operations and began to divest from the Commercial/Industrial unit
certain non-core businesses. As a result, the Company was required to take a
restructuring and special charge which, when coupled with other factors, caused
the Company to miss certain of its financial goals for fiscal 1997.
The Company has, however, taken broad strides toward meeting its
long-term financial and operational goals. It has assembled a management team
capable not only of implementing the Company's restructuring successfully, but
also of leading the Company into a new era of sustained growth. In fiscal 1997,
the Company's business remained vital. Revenues for the entire year were up
approximately $31.1 million, or 3.1%, over fiscal 1996. Fourth quarter revenues
in fiscal 1997 reached an all-time high, and three of the Company's five core
business units -- North American Retail, International Retail and Global Source
Tagging -- exceeded performance targets for the year. Ultra-Max(R) revenues rose
27% for the year and the Company launched twelve new products, the highest
number of new products in the Company's history, including the award-winning
Intellex(TM), an "intelligent" closed circuit television display, record and
analysis system.
Base Salary
Base compensation for executive officers reflects both the
individual's responsibilities and experience and the competitive salary ranges
for executives with similar responsibilities in corporations with revenues
comparable to those of the Company. The Governance Committee (and, until
September 1996, the Compensation Committee) relied on information from a variety
of sources to determine competitive cash compensation ranges, including
executive compensation surveys conducted by employee benefit consulting firms.
-9-
<PAGE> 12
Base salaries generally are modified annually as warranted by the
performance of the Company or the applicable department or business unit, or by
the performance of the executive officer or changes in his responsibilities. Mr.
Vanourek's base salary was increased by $50,000 in fiscal 1997 when he assumed
additional duties as the Company's Chief Executive Officer. The 1997 base
salaries of the Company's other executive officers reflected modest increases
over fiscal 1996 levels.
Bonuses
The annual cash bonus component of an executive officer's
compensation depends upon the officer's performance, that of the Company and, if
the executive officer has responsibility for a particular department or business
unit, the performance of that department or business unit. Certain officers,
including Messrs. Kendall, Price and Witter, have received incentive bonuses
based primarily on performance goals for the business unit or revenue-producing
operations for which they are responsible and in part on the achievement of
overall corporate goals. The bonuses for the Company's executive officers with
broad corporate responsibilities, such as the Chief Executive Officer and the
Chief Financial Officer, are based largely on the financial performance of the
Company overall, but also on such officers' efforts to implement the Company's
restructuring program and other major initiatives and their success in so doing.
The Company believes that an executive officer's responsibility for the success
of his business unit and of the Company increases as his duties expand.
Accordingly, a larger proportion of a more senior executive officer's
compensation generally will be variable, performance-based incentive
compensation, compared to that of other executive officers.
Although it failed to meet certain financial expectations in
fiscal 1997, the Company nevertheless awarded bonuses to certain of its
executive officers, on the basis of their substantial contributions to the
progress of the Company's restructuring and the reorganization and success of
several operating divisions in fiscal 1997.
Mr. Vanourek's bonus for fiscal 1997 was based on the progress
made overall in the restructuring of the Company and the major initiatives
undertaken to address challenges that arose during the past year.
Stock-Based Incentives and Stock Ownership
The Company believes that stock options are a very important
component of executive compensation because they encourage an executive to
remain in the Company's employ and link long-term rewards to stock price
appreciation. The Stock Incentive Plan Committee recognizes that such long-term
incentives will motivate executives to balance pressures to manage for the
short-term with the steps necessary to assure the Company's future vitality.
Under the Company's regular stock option incentive program, options typically
are granted annually.
Awards granted under the LTIPs are designed to serve as
longer-term incentives than yearly option grants under the 1995 Plan and have
not been made on an annual basis. In particular, options and restricted stock
awarded under the terms of an LTIP have longer vesting schedules than is the
case with other option grants to participants, with earlier vesting in whole or
in part if certain four-year performance goals are achieved.
In determining the size of a grant to an executive officer or
participating director under either the regular stock option incentive program
or an LTIP, the Stock Incentive Plan Committee considers the number of shares
that would be thought to be a meaningful incentive for long-term performance,
given the participant's position, responsibilities, level of cash and stock-
based incentive compensation, and expected contributions, as well as the
recommendations of employee benefits consultants who have studied such
compensation at comparable companies.
-10-
<PAGE> 13
The Company also believes that its directors and officers should
own outright a meaningful number of shares of the Company's stock in order to
ensure that stockholders' interests are given appropriate consideration in the
course of conducting the Company's business. Accordingly, the Company in July
1997 adopted guidelines for the levels of stock ownership recommended for its
directors and those officers holding the title of Vice President or higher.
Directors are expected to build up, over the three-year period following the
later of the adoption of the policy or joining the Board, stock ownership equal
in value to five times their annual retainer. The Company's Chief Executive
Officer is expected to own stock equal in value to his base salary within two
years, and twice his salary within five years, after adoption of the policy or
assuming such position. Those officers with the title Vice President or higher
are expected to own stock equal in value to their base salaries within five
years after such applicable date.
Surrender of Certain 1995 LTIP Awards
In fiscal 1997, the Stock Incentive Plan Committee approved the
establishment of the 1997 Long-Term Incentive Program (the "1997 LTIP"),
pursuant to which certain of the Company's officers, including certain executive
officers, were granted awards of restricted stock and options. Like the awards
under the 1995 Long-Term Incentive Program (the "1995 LTIP"), 1997 LTIP awards
may vest, in whole or in part, at the earliest, if certain four-year performance
goals established by the Stock Incentive Plan Committee are met. Although not
required by the terms of the 1995 LTIP, the Stock Incentive Plan Committee
determined that, in order to be eligible to participate in the 1997 LTIP,
officers who had received awards under the 1995 LTIP would have to surrender
their 1995 LTIP awards of options and restricted stock for cancellation. All
those executive officers who had participated in the 1995 LTIP and were
otherwise eligible to participate in the 1997 LTIP elected to surrender their
1995 LTIP awards and participate in the 1997 LTIP.
The surrender of the 1995 LTIP awards described above was the
only "repricing" or "exchange" of options or SARs effected during the last ten
fiscal years of the Company for the benefit of the Company's executive officers.
The following table summarizes certain information with respect to such
surrender.
10-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET
SECURITIES PRICE LENGTH OF ORIGINAL
UNDERLYING OF STOCK AT EXERCISE PRICE OPTION TERM
OPTIONS/SARS TIME OF AT TIME NEW REMAINING AT DATE
REPRICED OR REPRICING OR REPRICING OR EXERCISE OF REPRICING OR
NAME AND POSITION DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
- - ------------------------ -------- ------------ ------------ -------------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Ronald G. Assaf, N/A None N/A N/A N/A N/A
Chairman of the Board of
Directors and Chief
Executive Officer(1)
Robert A. Vanourek, N/A None N/A N/A N/A N/A
President and Chief
Executive Officer(2)
Garrett E. Pierce, N/A None N/A N/A N/A N/A
Senior Vice President
and Chief Financial
Officer
Gerd Witter, Senior 11/22/96 32,000 $20.625 $31.1875 $20.625 8 yrs. 1 mo.
Vice President and
President, Sensormatic
Europe(3)
</TABLE>
-11-
<PAGE> 14
<TABLE>
<CAPTION>
NUMBER OF MARKET
SECURITIES PRICE LENGTH OF ORIGINAL
UNDERLYING OF STOCK AT EXERCISE PRICE OPTION TERM
OPTIONS/SARS TIME OF AT TIME NEW REMAINING AT DATE
REPRICED OR REPRICING OR REPRICING OR EXERCISE OF REPRICING OR
NAME AND POSITION DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
- - ------------------------ -------- ------------ ------------ -------------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Jerry T. Kendall, 11/22/96 17,000 $20.625 $31.1875 $20.625 8 yrs. 1 mo.
Senior Vice President
and President, North
America Retail
Operations
Terry W. Price, Senior 11/22/96 19,000 $20.625 $31.1875 $20.625 8 yrs. 1 mo.
Vice President and
President, Commercial/
Industrial Worldwide
Operations
Walter A. Engdahl, 11/22/96 15,000 $20.625 $31.1875 $20.625 8 yrs. 1 mo.
Vice President --
Corporate Counsel and
Secretary
Olin S. Giles, Senior 11/22/96 20,000 $20.625 $31.1875 $20.625 8 yrs. 1 mo.
Vice President and Chief
Technical Officer
Ronald F. Premuroso, 11/22/96 17,000 $20.625 $31.1875 $20.625 8 yrs. 1 mo.
Senior Vice President
and President,
International Retail
Operations
</TABLE>
(1) Mr. Assaf was Chairman of the Board and Chief Executive Officer of the
Company until August 12, 1996, when Mr. Vanourek assumed the duties of
Chief Executive Officer of the Company.
(2) Mr. Vanourek was President and Chief Operating Officer of the Company
from October 1995 until August 12, 1996. At that time, he assumed the
position of Chief Executive Officer of the Company while continuing as
its President.
(3) Mr. Witter retired from employment with the Company effective August 31,
1997.
Internal Revenue Code Section 162(m)
In 1993, the Internal Revenue Service enacted Section 162(m) of
the Internal Revenue Code, which limits the deductibility of executive
compensation in excess of $1,000,000 per year. However, this limitation does not
apply to performance-based compensation, provided certain conditions are
satisfied. The Company's policy is generally to preserve the federal income tax
deductibility of compensation paid to its executives. Accordingly, to the extent
feasible, the Company has taken action to preserve the deductibility of certain
stock-based incentive awards to its executive officers under the 1995 Plan.
However, notwithstanding the Company's general policy, the Governance Committee
and the Stock Incentive Plan Committee retain the authority to authorize
compensation that may not be deductible if they believe that it is in the
interest of the Company to do so. Other elements of compensation, including
perquisites and cash and other bonuses, even those based on performance, may
also cause a covered executive officer's income to exceed deductible limits.
-12-
<PAGE> 15
Additional Factors Relating to CEO's Compensation
Mr. Assaf retired as the Company's Chief Executive Officer in
August 1996 after thirty years of service to the Company. Mr. Vanourek, who was
also the President and a director of the Company, assumed the additional duties
of Chief Executive Officer at that time, and continues to serve the Company in
all those capacities. The Committees measured Mr. Vanourek's performance in
fiscal 1997 by the above standards and with consideration of his role in
implementing the broad restructuring program, as well as other initiatives the
Company has undertaken, described above.
<TABLE>
<CAPTION>
Governance Committee Stock Incentive Plan Committee
-------------------- ------------------------------
<S> <C>
John T. Ray, Jr., Chairman John T. Ray, Jr., Chairman
Thomas V. Buffett Thomas V. Buffett
James E. Lineberger Arthur G. Milnes
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company established a Stock Purchase Loan Plan (the "Loan
Plan") in 1979 under which officers, directors and certain designated key
employees may borrow an amount equal to the purchase price of shares of the
Company's Common Stock purchased upon exercise of their respective stock options
("Option Shares") and an amount approximating the amount of income tax liability
resulting from the exercise of such options. Under the Loan Plan, loans
generally bear interest at the rate of 4% per annum, payable annually. Loans are
required to be secured and to comply with Federal Reserve margin requirements,
to the extent applicable. The loans generally are due within five years of the
date of the loan, upon cessation of employment or upon the sale of the Option
Shares, whichever occurs first. (Information regarding loans to directors and
executive officers under the Loan Plan is set forth below under "Stock Purchase
Loan Plan.")
Until September 1996, when the Governance Committee of the Board
of Directors assumed the duties of the Compensation Committee, Mr. LeWine was a
member of the Compensation Committee. The firm of Christy & Viener, of which Mr.
LeWine is a partner, acts as counsel to the Company and also performs legal
services for the Company's domestic and foreign subsidiaries. The firm received
fees in the aggregate amount of approximately $2,457,750 for legal services
rendered to the Company and its subsidiaries during the fiscal year ended June
30, 1997.
-13-
<PAGE> 16
SUMMARY COMPENSATION TABLE
The following table shows compensation for services rendered in
all capacities to the Company and its subsidiaries during fiscal 1997, 1996 and
1995 by the individuals who acted as the Company's Chief Executive Officer at
any time during fiscal 1997 and by the next four highest-paid executive officers
of the Company.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------------------- -------------------------
Restricted
Other Annual Stock All Other
Name and Principal Salary Bonus Compensation Awards Options/SARS Compensation
Position Year ($)(1) ($) ($) ($)(2) (#)(2)(3) ($)
-------- ---- ------- ------- ------------ ---------- ------------ ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald G. Assaf, 1997 454,062 -- 50,867(14) -- 7,500 52,345 (6)(7)(8)
Chairman of the Board of 1996 545,000 -- 58,566 -- 100,000 104,110 (5)(6)(7)(8)
Directors and Chief 1995 521,154 200,000 -- 726,669 150,000 54,166 (5)(6)(7)(8)
Executive Officer (4)
- - ----------------------------------------------------------------------------------------------------------------------------
Robert A. Vanourek, 1997 452,405 233,333 -- 688,009 307,814 1,363,928 (6)(7)(10)
President and Chief 1996 302,408 233,333 -- -- 450,000 61,563 (10)
Executive Officer (9) 1995 -- -- -- -- -- --
- - ----------------------------------------------------------------------------------------------------------------------------
Garrett E. Pierce, 1997 319,000 100,000 -- 387,998 60,802 135,117 (6)(7)(10)
Senior Vice President and 1996 138,462 150,000 -- -- 200,000 --
Chief Financial Officer (11) 1995 -- -- -- -- -- --
- - ----------------------------------------------------------------------------------------------------------------------------
Gerd Witter, Senior Vice 1997 322,500 20,000 -- 474,664 74,384 62,893 (8)(10)
President and 1996 301,309 110,806 -- -- 50,000 63,434 (8)(10)
President, Sensormatic 1995 209,365 83,960 -- 305,638 47,000 76,830 (8)(10)
Retail Europe (12)
- - ----------------------------------------------------------------------------------------------------------------------------
Jerry T. Kendall, Senior 1997 208,115 75,000 -- 239,993 37,610 45,591 (6)(7)(13)
Vice President and 1996 179,000 35,000 -- -- 35,000 13,336 (6)(7)(13)
President, North America 1995 173,635 20,000 -- 162,175 27,000 39,807 (6)(7)(13)
Retail Operations
- - ----------------------------------------------------------------------------------------------------------------------------
Terry W. Price, 1997 214,750 25,000 -- 259,999 40,744 33,010 (6)(7)(13)
Senior Vice President and 1996 203,000 63,807 -- -- 50,000 13,021 (6)(7)(13)
President, 1995 193,640 50,500 -- 184,006 34,000 36,171 (6)(7)(13)
Commercial/Industrial
Worldwide Operations
============================================================================================================================
</TABLE>
(1) In fiscal 1995 annual raises were effective near the beginning of a
calendar year. The salaries set forth for each fiscal year reflect amounts
actually paid during that fiscal year, including, in fiscal 1995, about six
months at the prior year's annual rate and about six months at the annual
rate for such fiscal year.
(2) Options and restricted stock were awarded to participants in the
Company's 1995 Long-Term Incentive Program (the "1995 LTIP") adopted in
fiscal 1995 under the 1995 Stock Incentive Plan (the "1995 Plan") and
participants in the Company's 1997 Long-Term Incentive Program (the
"1997 LTIP") adopted in fiscal 1997 under the 1995 Plan. In order to
participate in the 1997 LTIP, those who had received awards under the
1995 LTIP, including Messrs. Witter, Price and Kendall, were required to
surrender those awards of options and restricted stock for awards of
options and restricted stock under the 1997 LTIP. (See "Report of the
Governance and Stock Incentive Plan Committees" above.) Accordingly, the
awards, if any, granted under the 1995 LTIP to participants in the 1997
LTIP have been cancelled. The total undiscounted value of aggregate
restricted stockholdings of each of the named executive officers as of
the date of grant is set forth in this column, although vesting is
contingent on Company performance requirements and/or continued
employment with the Company. Dividends payable on restricted stock
-14-
<PAGE> 17
awards are held by the Company and paid to the grantee upon vesting, if
and when vesting occurs. As of June 30, 1997, the value of the
restricted stock held by the named executive officers was $299,988,
$429,484, $242,205, $296,305, $149,813 and $162,302 for Messrs. Assaf,
Vanourek, Pierce, Witter, Kendall and Price, respectively.
(3) The Company has not issued any stock appreciation rights to the named
executive officers. See footnote 1 to the table "Option/SAR Grants in
Last Fiscal Year" for summary terms of options granted.
(4) Mr. Assaf was Chairman of the Board and Chief Executive Officer of the
Company until August 12, 1996, when Mr. Vanourek assumed the duties of
Chief Executive Officer of the Company.
(5) Includes a contribution of approximately $35,000 toward the funding of a
$1,000,000 death benefit provided by the Company. The Company no longer
provides this benefit to Mr. Assaf.
(6) Includes contributions made by the Company under its Employee Stock
Ownership Plan, which is a defined contribution plan, to or for the
benefit of the eligible named executive officers. Under the ESOP, the
Company makes an annual contribution to a trust fund for the benefit of
participants in an amount determined by the Board of Directors. Fund
assets are required to be invested primarily in the Company's Common
Stock. The trust fund holds shares which it previously acquired from the
Company at a price of $8.46 per share, paid for by delivery of a
promissory note of the ESOP's trustee. Principal and interest of the
note are payable from the proceeds of the Company's annual
contributions. As the indebtedness is retired, a proportionate amount of
the purchased shares are allocated to the accounts of eligible employees
under such plan. In fiscal 1997, the Company contributed $258, $616,
$354, $616, and $616 to the accounts of Messrs. Assaf, Vanourek, Pierce,
Kendall and Price, respectively.
(7) Includes contributions made by the Company under its Sensor Save Plan
("SSP"), which is a defined contribution plan, to or for the benefit of
the eligible named executive officers. The SSP is a 401(k) plan under
which the Company makes annual contributions as determined by the Board
of Directors and additional contributions matching a proportion of
participating employees' voluntary contributions. In fiscal 1997, the
Company contributed $629, $4,875, $2,763, $4,875, and $4,640 to the
accounts of Messrs. Assaf, Vanourek, Pierce, Kendall and Price,
respectively.
(8) Includes contributions made by the Company under or in connection with
the Executive Salary Continuation Plan ("ESCP"), which is a plan that
provides for defined deferred compensation benefits, to or for the
benefit of the eligible named executive officers. Under the ESCP, a
participating executive officer will receive an annual retirement
benefit of an amount determined by the Board of Directors multiplied by
a percentage equal to the participant's vested interest as of the date
of the participant's termination of employment. Benefits generally vest
over a 15-year schedule and are payable in monthly installments for 15
years from the later of the participant's attainment of retirement age
(60) or the participant's actual retirement from employment with the
Company, or, if earlier, from the participant's death. The Company has
purchased life insurance policies on the participants and anticipates
that the cash surrender value and death benefits of such policies will
reimburse the Company for a portion of its obligations under the ESCP.
The Company's contributions toward the funding of benefits under the
ESCP during fiscal 1997 were $51,458 and $6,893 for Messrs. Assaf and
Witter, respectively. Based upon the ESCP as presently in effect,
Messrs. Assaf and Witter will receive $455,000 and $100,000,
respectively, annually. Mr. Assaf began receiving benefits under the
ESCP in February 1997.
-15-
<PAGE> 18
(9) Mr. Vanourek was President and Chief Operating Officer of the Company
from October 1995 until August 12, 1996. At that time, he assumed the
position of Chief Executive Officer of the Company while continuing as
its President. Mr. Vanourek's 1996 compensation reflects the 8.5 months
he was with the Company during that fiscal year.
(10) Includes contributions made by the Company under or in connection with
the Senior Executive Defined Contribution Retirement Plan (the "Senior
Executive Plan"), which is a target benefit defined contribution plan, to
or for the benefit of the eligible named executive officers. Under the
Senior Executive Plan, which was established by the Company in fiscal
1994 for certain senior officers, a participant will receive an annual
retirement benefit equal to the lesser of (i) the benefit previously
targeted for such participant by the Board of Directors or (ii) the
benefit which could be paid out of such participant's investment account
under the Senior Executive Plan, the annual yield of which will be
determined by the chief executive officer of the Company, subject to the
approval of the Board of Directors or a committee thereof, in each case
multiplied by a percentage equal to the participant's vested interest as
of the date of the participant's termination of employment. Benefits
under the Senior Executive Plan generally vest over a 15-year schedule,
but a participant who has ten or more years of service and is employed by
the Company immediately prior to his normal retirement is deemed to be
100% vested upon retirement. Benefits are payable in monthly installments
for 15 years after the later to occur of the participant's attainment of
retirement age (60) or his actual retirement from employment with the
Company, or, if earlier, the participant's death. Upon a change in
control of the Company, the monthly benefit payable under the Senior
Executive Plan would become equal to the targeted benefit and the
participant's benefit under the Senior Executive Plan would become 100%
vested. The Company has purchased life insurance policies on the
participants and anticipates that the cash surrender value and death
benefits of such policies will reimburse the Company for substantially
all its obligations under the Senior Executive Plan. The Company's
contributions toward the funding of benefits under the Senior Executive
Plan during fiscal 1997 were $1,358,437, $132,000 and $56,000 for Messrs.
Vanourek, Pierce and Witter, respectively. The 1997 contribution toward
the funding of Mr. Vanourek's benefits reflects payment of policy
premiums for two years. Based upon the Senior Executive Plan as presently
in effect, Messrs. Vanourek and Pierce, assuming their respective vested
interests will be 100% upon attaining retirement age and the yield from
their respective investment accounts will be sufficient to fund their
respective targeted benefits (as last determined by the Board of
Directors), could expect to receive annual retirement benefits under the
Senior Executive Plan of $387,500, and $225,000, respectively. Mr. Witter
will receive $68,000.
(11) Mr. Pierce joined the Company as its Chief Financial Officer in January,
1996. Mr. Pierce's 1996 compensation reflects the six months he was with
the Company during that fiscal year.
(12) Although Mr. Witter's cash compensation is presented in U.S. dollars,
such compensation is determined and payable in German marks. Fluctuations
in the rate of exchange between the two currencies from year to year
result in fluctuations in the cash compensation of Mr. Witter as reported
from year to year in U.S. dollars. Mr. Witter retired from employment
with the Company effective August 31, 1997.
(13) Includes contributions made by the Company under or in connection with
the Key Executive Supplemental Retirement Plan (the "KESRP"), a plan
providing for deferred defined compensation benefits for certain
executive officers and other key employees not covered by the Senior
Executive Plan or by the ESCP. In the case of Mr. Kendall and Mr. Price,
the KESRP would provide 15 years of monthly payments of a targeted
benefit determined by the Chief Executive Officer with the approval of
the Board, subject to periodic reviews and other factors. The award vests
5% after three years of service, an
-16-
<PAGE> 19
additional 5% for each year of service through eight years of service,
and an additional 10% for each year through fifteen years of service. The
vested interest of a participant who has ten or more years of service and
is employed by the Company immediately prior to his normal retirement
(age 62) is deemed to be 100% upon such retirement. The full targeted
benefit is payable to the participant's beneficiary or his estate in the
event of death or disability while actively employed by the Company. Upon
a change in control of the Company, the monthly benefit payable under the
KESRP would become equal to the targeted benefit and the participant's
benefit under the KESRP would become 100% vested. The Company has
invested in insurance contracts on the lives of KESRP participants to
provide the primary source of funds for benefit payments under the KESRP.
The Company's contribution toward the funding of benefits under the KESRP
during fiscal 1997 was $40,100 and $27,754 for Mr. Kendall and Mr. Price.
Based upon the KESRP as presently in effect, and assuming their interests
would be 100% upon attaining normal retirement age, Mr. Kendall and Mr.
Price could expect to receive annual retirement benefits of $42,500 and
$46,250, respectively.
(14) Of this total, $10,237 represents imputed interest income resulting from
Mr. Assaf's loan under the Company's Stock Purchase Loan Plan and $11,095
represents imputed income from the use of a Company-provided automobile.
The balance includes benefits paid under the Company's Executive Medical
Reimbursement Plan, membership dues, tax preparation fees and a
miscellaneous expense allowance.
The Company entered into an agreement with Mr. Assaf, effective
August 12, 1996, pursuant to which he will provide consulting services over a
five-year period and for which he will receive annual cash compensation of
$455,000 and certain benefits. Mr. Assaf does not receive separate compensation
for his service as Chairman of the Board of Directors. The Company also has an
agreement with Mr. Vanourek, terminable by the Company on 30 days' notice,
pursuant to which he currently receives a base salary of $475,000 per annum and
will have a targeted bonus of not less than $350,000 per annum. Under Mr.
Pierce's employment agreement with the Company, which is terminable by the
Company upon 30 days' notice, Mr. Pierce currently receives a base salary of
$320,000 per annum and will have a targeted bonus of not less than $150,000 per
annum. Mr. Vanourek and Mr. Pierce are each entitled to two years' severance if
their employment terminates under certain circumstances.
-17-
<PAGE> 20
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information with respect to
options granted during fiscal 1997 to each person named in the Summary
Compensation Table. In addition, in accordance with Securities and Exchange
Commission rules, there are shown hypothetical gains that would exist for the
options granted, based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term. The named officers will realize no gain on these options unless the
price of the Common Stock increases above the exercise price for such options,
which will benefit all stockholders proportionately. No stock appreciation
rights have been awarded by the Company.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------
Percent of Potential Realizable Value at
Options/ Total Assumed Annual Rates of Stock
SARS Options/SARS Price Appreciation for
Granted in Granted to Exercise Option Term(2)
Fiscal Employees in or Base Expiration -----------------------------
Name Year(1) Fiscal Year Price Date 5%($) 10%($)
---- ------- ----------- ----- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Ronald G. Assaf 7,500 .68% $15.1875 1/10/07 71,600 181,500
Robert A. Vanourek 200,000 27.93% $ 17.25 8/9/06 2,169,700 5,498,400
107,814 $ 20.625 11/22/06 1,398,500 3,543,900
Garrett E. Pierce 60,802 5.52% $ 20.625 11/22/06 788,700 1,998,600
Gerd Witter 74,384 6.75% $ 20.625 11/22/06 964,800 2,445,100
Jerry T. Kendall 37,610 3.41% $ 20.625 11/22/06 487,800 1,236,300
Terry W. Price 40,744 3.70% $ 20.625 11/22/06 528,500 1,339,300
All Optionees 1,102,095 100% $ 18.664 $ 12,935,800 $ 32,781,900
(participants)(3)
- - ---------------------------------------------------------------------------------------------------------------
All Stockholders' Potential $884,893,966 $2,242,495,047
Realizable Value at Assumed
Growth Rates(4)
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All options granted during the period were non-qualified options granted
pursuant to the 1995 Stock Incentive Plan (the "1995 Plan") at fair market
value on the date of grant. Most such options were granted under the 1995
Plan subject to the additional requirements of the Company's 1997 Long-Term
Incentive Program (the "1997 LTIP") and, in the cases of Messrs. Witter,
Kendall and Price, only upon the surrender of options previously granted
under the Company's 1995 Long-Term Incentive Program (the "1995 LTIP").
(See "Report of the Governance and Stock Incentive Plan Committees" above.)
Accordingly, options, if any, granted under the 1995 LTIP to participants
in the 1997 LTIP have been cancelled. Options granted to the named
executives and other officers of the Company have terms of ten years.
Options subject to the requirements of the 1997 LTIP will vest, in whole or
in part, as of June 30, 2000, if the Company meets certain performance
standards established by the Stock Incentive Plan Committee. To the extent
such options do not become exercisable at that time, they become fully
exercisable on October 22, 2006, if the holder thereof is still associated
with the Company. Other options granted pursuant to the 1995 Plan, like
options granted under the Company's predecessor Stock Incentive Plans,
generally become exercisable on a cumulative basis in three equal annual
installments, commencing on the first anniversary of the date of grant.
Certain options granted to executive officers under the 1995 Plan in fiscal
1995 become exercisable in full after the fifth anniversary of the date of
grant or at such earlier date on
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<PAGE> 21
which the fair market value of the Company's Common Stock has exceeded
the exercise price by at least 35% for at least ten consecutive trading
days, provided such earlier date is after the first anniversary of the
date of grant.
(2) The potential realizable value of these options does not take into
account any taxes or other expenses that might become payable as a
result of exercise. The Company expresses no opinion and makes no
representation that this level of appreciation will, in fact, be
realized.
(3) Calculated based on the weighted average exercise price of all options
granted during fiscal 1997 ($18.66), and assuming all options have a
term of ten years.
(4) Calculated based on the weighted average exercise price of all options
granted during fiscal 1997 ($18.66), and assuming stock price
appreciation at the indicated rates over the same period used to
calculate the individuals' potential realizable value.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table sets forth as to each person named in the
Summary Compensation Table the specified information with respect to option
exercises during fiscal 1997 and the status of their options at the end of
fiscal 1997.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised in-the-Money (2)
Number of Options/SARs at Fiscal Options/SARS at
Shares Value Year-End Fiscal Year-End ($)(3)
Acquired on Realized ---------------------------- ---------------------------
Name Exercise ($)(1) Exercisable Nonexercisable Exercisable Nonexercisable
---- ----------- -------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Ronald G. Assaf................... -- -- 1,167,833 299,166 -- --
Robert A. Vanourek................ -- -- 150,000 607,814 -- --
Garrett E. Pierce................. -- -- 66,666 194,136 -- --
Gerd Witter....................... -- -- 31,666 174,718 -- --
Jerry T. Kendall.................. -- -- 56,666 102,944 -- --
Terry W. Price.................... -- -- 46,666 128,078 -- --
</TABLE>
(1) The "value realized" represents the difference between the exercise
price of the option shares and the market price of the option shares
on the date the option is exercised. The value realized is determined
without considering any taxes that may become payable in respect of
the sale of and such shares.
(2) "In-the-money" options are options whose exercise price was less than
the market price of Common Stock at June 30, 1997. None of the named
executive officers had any unexercised in-the-money options as of June
30, 1997.
(3) Based on a stock price of $12.875 per share, which was the closing price
of a share of Common Stock reported on the New York Stock Exchange on
June 30, 1997.
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<PAGE> 22
PERFORMANCE GRAPH
The SEC requires the Company to present a line graph comparing
cumulative, five-year stockholder returns on an indexed basis with the Standard
& Poor's 500 Stock Index (the "S&P 500") (or another broad-based index) and
either a nationally-recognized industry standard or a group of peer companies
selected by the Company. The Company has selected, for purposes of this
performance comparison, eight public companies (the "Self-Constructed Peer
Group") believed to offer security products or services similar to those offered
by the Company, and the provision of which products or services represents a
significant portion of their respective businesses. A list of these companies
follows the graph below. The graph assumes that $100 was invested on June 1,
1992, in each of the Common Stock, the S&P 500 and the Self-Constructed Peer
Group (weighted on the basis of capitalization), and that all dividends were
reinvested.
<TABLE>
<CAPTION>
Sensormatic
Measurement Period Electronics
(Fiscal Year Covered) Corporation S&P 500 Peer Group
<S> <C> <C> <C>
1992 100 100 100
1993 147 114 130
1994 163 115 146
1995 203 145 163
1996 95 183 279
1997 76 247 359
</TABLE>
The Self-Constructed Peer Group consists of the following companies: ADT Ltd.;
Borg-Warner Security Corp.; Checkpoint Systems, Inc.; Diebold, Incorporated;
Pinkerton's, Inc.; Pittway Corp.; Vicon Industries, Inc. and The Wackenhut
Corporation. Automated Security Holdings Ltd. was a separate member of the peer
group in fiscal 1996, but was merged into ADT Ltd. in November 1996.
Agreements Relating to Change in Control
The Board of Directors, in 1988, authorized the Company to enter
into agreements (the "Agreements") providing for certain protections and
benefits for all executive and certain other officers in connection with a
change in control of the Company. The Agreements, among other things, protect
the value of stock options held by such persons, protect their retirement
benefits, provide for severance compensation in the event of certain
terminations of service and provide, in certain cases where the Company is
acquired at a premium over the market price for the Common Stock, for a bonus
based on such premium.
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<PAGE> 23
For purposes of the Agreements, a "change in control" will be
deemed to have occurred if (a) any "person" or "group" of persons (as the terms
"person" and "group" are used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934 and the rules thereunder) is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 30% or
more of the combined voting power of the then outstanding securities of the
Company or (b) a change of more than 25% in the composition of the Board of
Directors occurs within a two-year period unless such change was approved in
advance by at least two-thirds of the previous directors.
Under the Agreements, upon the occurrence of a change in control,
all stock options become fully exercisable. In addition, in the case of an
acquisition of 50% or more of the Company's voting securities, or a merger or
certain other events which result in the elimination of the Common Stock or a
cessation of trading of the Common Stock in a nationally recognized market, the
Company may be required by the officers to purchase options or stock held by
them at the highest price per share paid in connection with the change in
control, less, in the case of unexercised options, the exercise price (or, in
the case of shares previously acquired upon exercise of options, a price equal
to the cost of such option shares (including related tax costs), if greater).
The Agreements provide for the protection of compensation levels
and benefits during an attempted change in control and for three years following
a change in control. In addition, the Agreements provide for severance
compensation in amounts commensurate with previous annual compensation in the
event of certain terminations of service with the Company following a change in
control. Severance payments would be payable generally for a period of up to 36
months, but not less than 24 months, in the event of involuntary termination of
service (other than for cause, as defined in the Agreements) within 36 months
following a change in control deemed "non-approved" by the Board of Directors.
In the case of the chief executive officer of the Company, similar payments
would be payable following an "approved" change in control and irrespective of
the manner of termination (other than for cause). Also, following an approved
change of control, the Chief Executive Officer would be required to provide
consulting services to the Company during a portion of the period he receives
severance compensation following a voluntary termination of service. For other
officers generally, severance payments would be payable for up to one year in
the event of voluntary termination of service following a "non-approved" change
in control or involuntary termination of service following an "approved" change
in control. Involuntary termination is defined to include resignation following
a material change in responsibilities, a reduction in compensation or
relocation.
The Agreements also provide, in the event of termination of
service of the officer following a "non-approved" change in control, that the
Company pay to such officer an amount equal to the non-vested portion of his
accounts under the Company's employee retirement plans (other than the ESCP).
The Agreements further provide, in the event of a change in
control involving the acquisition of 50% or more of the Company's voting
securities, or a merger or other transaction affecting the market in the Common
Stock as described above, for the payment of bonuses if the stockholders receive
a substantial premium over the market price of the Company's Common Stock. The
amounts of such bonuses are directly related to, and increase in relation to
increases in, the percentage of such premium.
Pursuant to the Agreements, the officers are obligated to
continue to make their services available to the Company during an attempted
change in control and for six months following a change in control.
In 1988, the Company also entered into agreements similar to the
Agreements described above with certain non-executive officers, other key
employees and Mr. LeWine. Certain
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<PAGE> 24
other officers and other key employees of the Company have also been granted
agreements providing for certain benefits following a "non-approved" change in
control.
In addition, in 1989, the Company entered into an agreement with
Dr. Milnes, a director of the Company, containing provisions with respect to
options and stock held by him and the protection of retirement benefits under
the Directors Retirement Plan substantially similar to the corresponding
provisions in the Agreements. Such agreement for Dr. Milnes does not provide for
any severance benefits, bonus payments or similar benefits. In 1996, similar
agreements were entered into with Messrs. Buffett, Hartman and Ray, also
directors of the Company.
Under his employment arrangement, the Company has also agreed
that Mr. Pierce would be entitled to such benefits applicable to executive
officers generally.
The Board of Directors of the Company believes that the
Agreements will help assure management's continued dedication to their duties to
the Company notwithstanding the occurrence of any change in control and in
particular, will enable management to assess objectively and impartially, and
advise the Board of Directors with respect to, any proposal received by the
Company regarding a change in control. In addition, such agreements will help
assure continued services to the Company by management and other key personnel.
Stock Purchase Loan Plan
Under the Company's Stock Purchase Loan Plan established in 1979
to facilitate the exercise of stock options, Mr. Assaf and Mr. Lineberger had
loans outstanding during the fiscal year ended June 30, 1997, in the maximum
amount of $1,781,648 and $996,817 respectively. Those amounts represent the
currently outstanding balances of the loans. The loan presently outstanding to
Mr. Lineberger was outstanding in March 1984 and, in accordance with amendments
to the Stock Purchase Loan Plan adopted in March 1984, was non-interest bearing
through March 1996. In February 1996 the Board of Directors extended the term of
Mr. Lineberger's loan to March 1998, with interest accruing thereon at 6% per
annum beginning after March 1996. The loan to Mr. Assaf was made during fiscal
1996.
Transactions with Management
The Company holds a June 30, 1995, promissory note of TSI
Security Acquisition Corp. ("TSI"), a company in which Mr. Lineberger is the
principal investor, in original principal amount of $109,789. The note is
payable in installments from 1996 to 2000, bears interest at the rate of 10% per
annum and is subordinate to other indebtedness of TSI borrowed for working
capital purposes. The outstanding principal balance of the TSI note at June 30,
1997, was $99,789.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own beneficially more
than 10% of the Company's outstanding Common Stock to file with the SEC initial
reports of beneficial ownership and reports of changes in beneficial ownership
of Common Stock and other securities of the Company on Forms 3, 4 and 5, and to
furnish the Company with copies of all such forms they file. Based on a review
of copies of such reports, all of the Company's directors and officers timely
filed all reports required with respect to fiscal 1997.
Certain Legal Proceedings
Three derivative actions have been filed against certain
directors of the Company in the Court of Chancery of the State of Delaware by
Marion Lord and Norman Rabinstein, Harry Lewis, and Alan Freberg on or about
September 7, September 13 and September 14, 1995, respectively. The complaints
name Messrs. Ronald G. Assaf, Thomas V. Buffett, Jerome M.
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<PAGE> 25
LeWine, James E. Lineberger, John T. Ray, Jr. and Dr. Arthur G. Milnes, six of
the Company's current directors, and Mr. Michael Pardue, a former director, as
defendants, and the Company as nominal defendant. The complaints assert, among
other things, claims for breach of fiduciary duties of care and loyalty,
mismanagement and waste of corporate assets. The plaintiffs, who claim to be
stockholders of the Company, seek restitution and/or damages in favor of the
Company and imposition of a constructive trust upon defendants' proceeds from
trading activities in the Company's securities allegedly based upon non-public
information, together with costs, attorneys' fees, accountants' fees, experts'
fees and other relief. These three actions have been consolidated. These actions
arise out of alleged statements and omissions regarding, among other things, the
Company's financial results and accounting practices that are also generally the
subject of a pending class action against the Company and current and former
officers and directors of the Company, which class action is described in the
Company's 1997 Annual Report on Form 10-K. The Company intends to defend
vigorously against these actions.
SUBMISSION OF STOCKHOLDER PROPOSALS
In order for a stockholder proposal to be eligible for inclusion
in the Company's proxy material relating to its 1998 Annual Meeting (currently
scheduled to be held on November 13, 1998) it must be in writing and received by
the Secretary of the Company prior to June 5, 1998. Stockholders wishing to
bring any matter before a meeting should consult the Company's By-Laws with
respect to any applicable notice or other procedural requirements.
ANNUAL REPORT
All stockholders of record on September 22, 1997, have been sent,
or are concurrently being sent, a copy of the Company's 1997 Annual Report on
Form 10-K, which contains certified financial statements of the Company for the
fiscal year ended June 30, 1997.
ANY PERSON WHO WAS A STOCKHOLDER OF THE COMPANY AT THE CLOSE OF
BUSINESS ON SEPTEMBER 22, 1997, MAY OBTAIN ADDITIONAL COPIES OF THE COMPANY'S
1997 ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WITHOUT CHARGE, BY WRITTEN REQUEST TO THE COMPANY, 951 YAMATO ROAD,
BOCA RATON, FLORIDA 33431-4425, ATTENTION: INVESTOR RELATIONS.
ACCOUNTANTS
The Company's independent auditors, selected by the Board of
Directors, are Ernst & Young L.L.P, certified public accountants. Ernst & Young,
and its predecessor, Arthur Young & Company, have served as the Company's
auditors since 1969.
Representatives of Ernst & Young are expected to be present at
the Annual Meeting of Stockholders, and will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions at the meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Company knows of no
matter other than those set forth herein which will be presented for
consideration at the Annual Meeting of Stockholders. If any other matter or
matters are properly brought before the meeting or any adjournment thereof, it
is the intention of the persons named in the accompanying proxy to vote, or
otherwise act, on such matters in accordance with their judgment.
WALTER A. ENGDAHL
Secretary
Boca Raton, Florida
September 29, 1997
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<PAGE> 26
SENSORMATIC ELECTRONICS CORPORATION
PROXY - ANNUAL MEETING OF STOCKHOLDERS - NOVEMBER 14, 1997
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, a stockholder of SENSORMATIC ELECTRONICS
P CORPORATION, a Delaware corporation (the "Company"), does hereby appoint
WALTER A. ENGDAHL and GARRETT E. PIERCE, and each of them, the true and
R lawful attorneys and proxies, with full power of substitution, for and in
the name, place and stead of the undersigned, to vote, as designated on the
O reverse side, all of the shares of stock of the Company which the
undersigned would be entitled to vote if personally present at the Annual
X Meeting of Stockholders of the Company to be held at the US Grant Hotel, 326
Broadway, San Diego, California 92101-9709, on November 14, 1997, at 10
Y A.M., local time, and at any adjournment or adjournments thereof.
SEE REVERSE
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE) SIDE
<PAGE> 27
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
UNLESS OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE NOMINEES.
1. ELECTION OF DIRECTORS. 2. To vote with discretionary authority
with respect to all other matters
NOMINEES: Timothy P. Hartman, that may come before the meeting.
J. Richard Munro and
Robert A. Vanourek
[ ] FOR [ ] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
For, except vote withheld from the following
nominee or nominees:
[ ]________________________________________ MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT [ ]
NOTE: Your signature should appear the same as
your name appears hereon. In signing as attorney,
executor, administrator, trustee or guardian,
please indicate the capacity in which signing.
When signing as joint tenants, all parties in the
joint tenancy must sign. When a proxy is given by
a corporation, it should be signed by an
authorized officer and the corporate seal
affixed. No postage is required if returned in
the enclosed envelope and mailed in the United
States.
The undersigned hereby revokes any proxy or
proxies heretofore given and ratifies and
confirms all that the proxies appointed hereby,
or either of them, or their substitutes, may
lawfully do or cause to be done by virtue hereof.
Both of said proxies or their substitutes who
shall be present and act at the meeting, or if
only one is present and acts, then that one,
shall have and may exercise all of the powers
hereby granted to such proxies. The undersigned
hereby acknowledges receipt of a copy of the
Notice of Annual Meeting and Proxy Statement,
both dated September 29, 1997, and a copy of the
Annual Report on Form 10-K for the fiscal year
ended June 30, 1997.
Signature:________________ Date:_______ Signature:_______________ Date:________
