<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant /x/
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 Section 240.14a-11(c) or Section
240.14a-12
ITI TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(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)(1)
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:
------------------------------------------------------------------------
<PAGE>
ITI TECHNOLOGIES, INC.
A DELAWARE CORPORATION
2266 NORTH SECOND STREET
NORTH ST. PAUL, MINNESOTA 55109
-----------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 1997, AT 9:00 O'CLOCK A.M.
-----------------------------------------------------
TO ITI TECHNOLOGIES, INC. STOCKHOLDERS:
The annual meeting of the stockholders of ITI Technologies, Inc. (the "COMPANY")
will be held on May 22, 1997, at 9:00 o'clock a.m., C.D.T., at the Marquette
Hotel, Seventh Street and Marquette Avenue, Minneapolis, Minnesota 55402, for
the following purposes:
1. To elect a Board of Directors.
2. To consider and act upon a proposed amendment to the Company's
Certificate of Incorporation to increase the number of authorized
shares of common stock.
3. To ratify the selection by the Board of Directors of Coopers &
Lybrand, L.L.P. as the independent accountants to audit the
consolidated financial statements of the Company for the year ending
December 31, 1997.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
In accordance with the Bylaws of the Company, the Board of Directors has set the
close of business on April 7, 1997, as the record date for the determination of
the stockholders entitled to notice of and to vote at the meeting or any
adjournments thereof.
Your attention is respectfully directed to the attached Proxy Statement and the
Proxy. IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN THE
ATTACHED PROXY AND DATE, SIGN AND MAIL IT AS PROMPTLY AS POSSIBLE IN ORDER TO
SAVE THE COMPANY FURTHER SOLICITATION EXPENSE.
By order of the Board of Directors
CHARLES A. DURANT
Secretary
<PAGE>
ITI TECHNOLOGIES, INC.
A DELAWARE CORPORATION
2266 NORTH SECOND STREET
NORTH ST. PAUL, MINNESOTA 55109
612-777-2690
------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 1997
------------------------------------
SOLICITATION OF PROXIES
This Proxy Statement is submitted in support of the solicitation of the enclosed
proxy by the Board of Directors of ITI Technologies, Inc., a Delaware
corporation (the "Company"), for the annual meeting of the stockholders of the
Company (the "Annual Meeting") to be held on May 22, 1997, at 9:00 o'clock a.m.
at the Marquette Hotel, Seventh Street and Marquette Avenue, Minneapolis,
Minnesota 55402, and at any adjournments thereof. The cost of solicitation will
be borne by the Company. This Proxy Statement and the accompanying Proxy and
Notice of Annual Meeting of Stockholders is intended by the Company to be mailed
to its stockholders on or about April 11, 1997. The Company may reimburse
brokerage firms, banks, and other custodians, nominees, and fiduciaries for
expenses reasonably incurred in forwarding solicitation materials to beneficial
owners of shares.
The Company may have one or more of its officers or employees communicate by
telephone, telegraph, or mail with some of the stockholders who may have omitted
to return proxies.
VOTING AND REVOCATION OF PROXY
The Annual Meeting is being held for the purposes of electing the Company's
Board of Directors, to consider and act upon the proposed amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of common stock, to ratify the selection by the Board of Directors of
Coopers & Lybrand L.L.P. as the Company's independent accountants for the year
ending December 31, 1997, and to transact such other business as may properly
come before the Annual Meeting or any adjournments thereof.
The annual report of the Company for the year ended December 31, 1996, including
financial statements, is being mailed to stockholders simultaneously herewith,
but the annual report is not to be considered part of the proxy soliciting
materials.
Only holders of record of shares of the Company's $0.01 per share par value
common stock (the "Common Stock") at the close of business on April 7, 1997, the
record date of the Annual Meeting, will be entitled to notice of and to vote at
the Annual Meeting and any adjournment thereof. The securities of the Company
outstanding as of April 7, 1997, and which are entitled to vote at the Annual
Meeting consist of 8,324,062 shares of Common Stock, each share being entitled
to one vote. Stockholders do not have the right to cumulate votes for the
election of directors.
<PAGE>
The enclosed Board of Directors' proxy, when properly signed and returned to the
Company, will be voted at the Annual Meeting as directed therein. Proxies in
which no direction is given with respect to the various matters of business to
be transacted at the Annual Meeting will be voted (i) FOR the election of the
six nominees for the Board of Directors named in this Proxy Statement; (ii) FOR
the approval of the proposed amendment to the Certificate of Incorporation; and
(iii) FOR the ratification of the appointment of Coopers & Lybrand L.L.P. as the
Company's independent accountants for the year ending December 31, 1997. While
the Board of Directors knows of no other matters to be presented at the Annual
Meeting or any adjournment thereof, all proxies returned to the Company will be
voted on any such matter in accordance with the judgment of the proxy holders.
The enclosed proxy may be revoked at any time before it is voted by the
execution and delivery of a proxy bearing a later date or by notification in
writing given to the Secretary of the Company prior to the Annual Meeting. The
enclosed proxy may also be revoked by attending the Annual Meeting and electing
to vote in person.
A quorum, consisting of a majority of the shares of Common Stock entitled to
vote at the Annual Meeting, must be present in person or by proxy before action
may be taken at the Annual Meeting. In accordance with the laws of the State of
Delaware and the Company's Certificate of Incorporation and Bylaws, (i) with
respect to the election of directors, which requires a plurality of the votes
cast, only proxies and ballots indicating votes "FOR all nominees," "WITHHELD
for all nominees," or specifying that votes be withheld for one or more
designated nominees, are counted to determine the total number of votes cast,
and broker non-votes are not counted, and (ii) with respect to the adoption of
all other proposals, which are decided by a majority of the shares of the stock
of the Company present in person or by proxy and entitled to vote, only proxies
and ballots indicating votes "FOR," "AGAINST" or "ABSTAIN" on the proposal or
providing the designated proxies with the right to vote in their judgment and
discretion on the proposal are counted to determine the number of shares present
and entitled to vote, and broker non-votes are not counted.
PROPOSAL 1
ELECTION OF DIRECTORS
GENERAL
The Bylaws of the Company provide that the number of directors may be set by the
Board of Directors at any time but may not be fewer than three nor more than
nine. The Board has set the number of directors at no fewer than six nor more
than eight.
It is the recommendation of the Company's Board of Directors that the six
nominees named below be elected as directors, to serve as directors until the
next annual meeting of the stockholders and until their successors shall be duly
elected and qualified as directors. The Board may appoint up to two additional
members to the Board if individuals qualified to serve as directors are found
and agree to serve.
Unless otherwise directed, the proxies solicited by the Board of Directors will
be voted in favor of the nominees named below. However, in the event of the
inability or unwillingness of one or more of these nominees to serve as a
director at the time of the Annual Meeting on May 22, 1997, or any adjournments
thereof, the shares represented by the proxies will be voted in favor of the
remainder of such nominees and may also (in the discretion of the holders of
said proxies) be voted for other nominees not named herein, in lieu of those
unable or unwilling to serve. As of the date hereof, the Board of Directors
knows of no nominee who is unable or unwilling to serve.
2
<PAGE>
All of the nominees of the Board of Directors are presently serving as directors
of the Company. The names, ages and tenure of all six nominees are as follows:
Ages Director Since
---- --------------
Thomas L. Auth 52 1992
W. Wallace McDowell, Jr. 60 1992
William C. Ughetta, Jr. 36 1992
Perry J. Lewis 59 1992
Sangwoo Ahn 58 1992
Walter R. Barry, Jr. 63 1995
STOCKHOLDER APPROVAL
The affirmative vote of a plurality of the voting power of the shares present in
person or by proxy at the Annual Meeting and entitled to vote (assuming a quorum
is present) is required to elect each director.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION
OF THE SIX NOMINEES FOR THE BOARD OF DIRECTORS AS SET FORTH IN PROPOSAL 1.
INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS
The following discussion sets forth certain information regarding the nominees
for the Board of Directors of the Company.
THOMAS L. AUTH has been an executive officer of Interactive Technologies, Inc.,
a wholly-owned subsidiary of the Company ("Interactive Technologies"), since
1981 and President since 1983. He has been President and Chief Executive
Officer of the Company since March 1993 and a director since May 1992. Mr. Auth
was appointed Chairman of the Board of Directors on April 1, 1997. Mr. Auth
also is a director of Ergodyne Corporation, EH Publishing, Inc., and Vomela
Specialty Company, which are privately-held companies. He has served as the
Treasurer and a Board member of the Security Industry Association and is also a
certified public accountant.
W. WALLACE MCDOWELL, JR. has been a director of the Company and has served as
Chairman of the Board of Directors from May 1992 to April 1997. On November 1,
1994, he became a private investor. From 1991 until November 1, 1994, he was a
Managing Director of Morgan Lewis Githens & Ahn ("MLG&A"), a privately-owned
international investment banking and leveraged buyout firm which was founded in
1982. From 1983 until January 1991, Mr. McDowell was Chairman and Chief
Executive Officer of the Prospect Group, Inc., which was founded as a private
venture capital company and evolved into a diversified leveraged acquisition
company. Mr. McDowell is a director of U.S. HomeCare, Inc., Children's
Discovery Centers of America, and Jack Morton Productions. He also is a trustee
of Excelsior Funds, a group of mutual funds.
WILLIAM C. UGHETTA, JR. has been a director of the Company since February 1992
and an officer since March 1992. Mr. Ughetta currently serves as Assistant
Secretary of the Company. Mr. Ughetta joined MLG&A as a Vice President in
October 1990 and became a managing director in January 1994. He also is a
managing director of MLGAL Partners, L.P., which is the general partner of MLGA
Fund II, L.P. From 1989 to
3
<PAGE>
October 1990, Mr. Ughetta was a Vice President in the corporate finance group of
The Prudential Insurance Company of America. Mr. Ughetta also is a director of
Gradall Industries, Inc.
PERRY J. LEWIS has been a director of the Company since May 1992 and was
President from May 1992 until March 1993. Mr. Lewis was a founding partner of
MLG&A and has served as a partner of that firm since 1982. He has been a
general partner of MLGAL Partners, L.P. since April 1987. Mr. Lewis is a
director of Aon Corporation, Evergreen Media Corporation, Stuart Entertainment,
Inc., Quaker Fabric Corporation, and Gradall Industries, Inc.
SANGWOO AHN has been a director of the Company since May 1992. He was a
founding partner of MLG&A and has served since April 1982 as a partner of that
firm. He has been a general partner of MLGAL Partners, L.P., since April 1987.
Mr. Ahn is also a director of Kaneb Pipe Line Partners, L.P., Kaneb Services,
Inc., PAR Technologies, Inc., Stuart Entertainment, Inc., Quaker Fabric
Corporation, and Gradall Industries, Inc.
WALTER R. BARRY, JR. has been a director of the Company since February 1995.
Mr. Barry is a director of Old Country Buffets, Inc., a publicly-held company,
and he also serves as a director of Diamond Brands Inc. and Tru-Stone Corp.,
which are privately-held companies. Until January 1, 1988, Mr. Barry served as
an Executive Vice President of General Mills, Inc., a manufacturer and marketer
of consumer foods.
BOARD ACTIONS AND COMMITTEES
During the fiscal year ended December 31, 1996, the Board of Directors held six
formal meetings and twice adopted written actions in lieu of a meeting. Board
members also met informally during the year to discuss various aspects of the
business affairs of the Company.
All directors hold office until the next annual meeting of stockholders and
until their successors have been elected and qualified or until their earlier
death, resignation or removal from office. The officers of the Company are
appointed by the Board of Directors and hold office until their successors are
chosen and qualified or until their earlier death, resignation, or removal from
office.
The Compensation Committee of the Board of Directors for 1996 and 1997 consisted
of and consists of Thomas L. Auth, W. Wallace McDowell, Jr., and Perry J. Lewis.
Messrs. McDowell and Lewis are non-employee directors of the Company and
constitute the members of the Sub-Committee of the Compensation Committee (the
"Compensation Sub-Committee") that administer certain aspects of the Company's
Long-Term Stock Incentive Plan (the "Stock Incentive Plan"). The Compensation
Committee makes recommendations to the Board regarding the compensation of
executive officers, and the Compensation Committee and Compensation
Sub-Committee administer the Company's Stock Incentive Plan. The Compensation
Committee adopted written actions in lieu of meetings twice during 1996.
The Audit Committee of the Board of Directors for 1996 and 1997 consisted of and
consists of W. Wallace McDowell, Jr., William C. Ughetta, Jr., and Walter R.
Barry, Jr., all of whom are non-employee directors of the Company. The Audit
Committee annually recommends independent accountants for appointment by the
Board of Directors and ratification by the stockholders, reviews the services to
be performed by the independent accountants, and receives and reviews the
reports submitted by them. The Audit Committee held one meeting during 1996.
The Board of Directors has no nominating committee.
4
<PAGE>
No member of the Board of Directors attended less than 75% of the aggregate of
(i) the total number of meetings of the Board of Directors and (ii) the total
number of meetings held by all committees of the Board on which he served.
INFORMATION REGARDING CERTAIN EXECUTIVE OFFICERS
CHARLES E. BRISKEY has been employed by Interactive Technologies in various
capacities since July 1981. He has been an executive officer of the Company
since March 1993. He has been Senior Vice President, Operations since March
1996 and Treasurer since March 1993. Mr. Briskey served as Vice President,
Operations from July 1985 until March 1996. He has responsibility for all
production and purchasing activities.
ROBERT E. BRUNIUS has been employed by Interactive Technologies in engineering
activities since August 1981. He has been an executive officer of the Company
since September 1994. He has been Senior Vice President, Engineering since
March 1996 and was Vice President, Engineering of Interactive Technologies from
May 1984 until March 1996.
JACK A. REICHERT joined Interactive Technologies in February 1991 as Controller
and became an executive officer of the Company in September 1994. He now serves
as Vice President, Finance of the Company and Vice President, Finance and
Administration of Interactive Technologies. From May 1990 until February 1991,
he was Controller at American Coating Technology, Inc., a paper coating concern.
From 1983 until May 1990, Mr. Reichert held various accounting positions with
Donaldson Company, Inc., a multinational manufacturer of filtration products and
accessories. He is also a certified public accountant.
CHARLES A. DURANT has been an employee of the Company and Interactive
Technologies since January 1996 and became Secretary of the Company and the Vice
President, General Counsel and Secretary of Interactive Technologies in March
1996. From September 1989 until January 1996, he was an attorney at Winthrop &
Weinstine, P.A., which provides legal services to the Company and Interactive
Technologies. Mr. Durant attended law school at the University of Minnesota
from August 1986 until May 1989. From June 1979 until May 1988, he held various
accounting positions with Honeywell Inc. Mr. Durant serves as a director of
Coffee House Press, a private Minnesota nonprofit corporation.
DUANE PAULSON has been Vice President, Marketing of Interactive Technologies
since March 1996 and has been employed in various marketing positions at
Interactive Technologies since 1991. From August 1988 to March 1991, he was a
management consultant to member utilities while on the staff of the National
Rural Electric Cooperative Association. From March 1980 to August 1988, he held
various marketing and public relations positions with United Power Association,
a Minnesota utility.
REED G. GROTHE has been Vice President, Sales of Interactive Technologies since
March 1996 and has been employed at Interactive Technologies since February
1995. He was Executive Vice President, Sales and Administration for General
Office Products Company, a regional distributor of office equipment, supplies
and furnishings, from June 1990 to February 1995. From 1986 to 1989, he was
President of Executone of Minnesota, a regional distributor of telephone and
hospital communication systems.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for 1994, 1995
and 1996 awarded to or earned by the Company's Chief Executive Officer and the
four other highest-compensated executive officers of the Company whose salaries
and bonuses exceeded $100,000 during 1996:
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation Number of
Name and ------------------- Stock Options All Other
Principal Position Year Salary Bonus Granted (3) Compensation(4)
------------------ ---- ------ ----- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Thomas L. Auth 1994 $300,000 $ 82,500(2) 90,909 $2,250
President and Chief 1995 300,000 139,500(2) 160,000 2,250
Executive Officer 1996 325,000 156,000(2) 100,000 2,250
Stephen J. Wanek (1) 1994 $160,000 $ 33,000(2) 36,364 $2,250
Senior Vice President 1995 160,000 55,800(2) 55,000 2,250
1996 165,000 57,600(2) 35,000 2,250
Charles E. Briskey 1994 $140,000 28,875(2) 31,818 $2,100
Senior Vice President, 1995 140,000 55,800(2) 55,000 2,250
Operations 1996 150,000 57,600(2) 35,000 2,250
Robert E. Brunius 1994 $140,000 $ 28,875(2) 31,818 $2,100
Senior Vice President, 1995 140,000 55,800(2) 55,000 2,250
Engineering 1996 150,000 57,600(2) 35,000 2,250
Reed G. Grothe 1994 $ --- $ --- --- $ ---
Vice President, Sales 1995(5) 85,773 10,850 7,000 ---
1996 110,000 14,300 5,500 1,039
</TABLE>
- ------------------
(1) Mr. Wanek resigned as an employee and officer of the Company on February
28, 1997, to pursue other interests.
(2) Represents bonuses earned for the year shown on the table and paid in the
following year.
(3) Consists of non-qualified stock options granted under the Stock Incentive
Plan. See "Proposal 1--Election of Directors--Executive
Compensation--Stock Options."
(4) Other compensation consists of matching contributions made by the Company
on behalf of each of the named individuals under its 401(k) profit-sharing
plan. Salary deferrals into the 401(k) plan are included in the salary
column.
(5) Mr. Grothe was hired by the Company on February 20, 1995. Accordingly, the
salary and bonus for 1995 represent only a partial year.
6
<PAGE>
STOCK OPTIONS
The following description of the Stock Incentive Plan is qualified in its
entirety by reference to the text of the Stock Incentive Plan.
On May 11, 1992, in connection with the acquisition of Interactive Technologies
by the Company, the Company's Board of Directors and stockholders approved the
Stock Incentive Plan. The Stock Incentive Plan permits the granting of awards
to employees of Interactive Technologies in the form of stock options,
restricted stock, restricted stock units, and stock appreciation rights
(collectively, "Awards"). Stock options granted under the Stock Incentive Plan
are intended to be non-qualified options not meeting the requirements of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
The Stock Incentive Plan is intended to assist the Company in hiring and
retaining well-qualified employees by allowing them to participate in the
ownership and growth of the Company through the grant of Awards. Management
feels that the granting of Awards under the Stock Incentive Plan will serve as
partial consideration for, and give key employees an additional inducement to,
remain in the service of the Company and provide them with an increased
incentive to work for the Company's success.
As of February 17, 1997, the Stock Incentive Plan provided for the grant of
Awards to acquire up to 2,000,000 shares of Common Stock. As of February 17,
1997, the following stock options were outstanding under the Stock Incentive
Plan:
<TABLE>
<CAPTION>
Exercise Number Exercise Number
-------- ------ -------- ------
Series Price (Per Share) Outstanding Series Price (Per Share) Outstanding
- ------ ----------------- ----------- ------ ----------------- -----------
<S> <C> <C> <C> <C> <C>
A $ 5.00 180,200 C 26.75 13,500
B 7.50 7,000 C 30.75 80,000
C 5.00 94,700 C 33.50 2,000
C 23.75 69,350 C 28.75 2,000
C 25.25 7,500 C 28.31 1,000
C 22.75 5,000 D 6.00 156,909
C 25.63 1,500 D 23.75 205,000
C 29.25 1,000 D 26.75 205,000
C 27.25 2,000 E 22.56 120,000
</TABLE>
As of February 17, 1997, all Series A Options, Series B Options and Series E
Options were exercisable, Series C Options to purchase 75,310 shares of Common
Stock were exercisable, and Series D Options to purchase 558,709 shares were
exercisable. The Company has filed a Registration Statement on Form S-8
registering the resale of the shares purchased upon the exercise of such
options.
7
<PAGE>
The following table sets forth information concerning individual grants of all
stock options made during the year ended December 31, 1996, to each of the
executive officers named in the Summary Compensation Table. Options described
in the table were granted under the Company's Stock Incentive Plan as part of an
overall incentive compensation program.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Percentage Value at Assumed
Number of of Total Annual Rates of Stock
Securities Options Price Appreciation for
Underlying Granted to Option Term(1)
Options Employees Exercise Expiration --------------
Name Granted(2) in 1996 Price Date 5% 10%
- ---- ---------- ---------- -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Auth 100,000 32% $26.75(3) 05/08/06 $1,682,293 $4,263,261
Stephen J. Wanek 35,000 11% 26.75(3) 05/08/06 588,803 1,492,141
Charles E. Briskey 35,000 11% 26.75(3) 05/08/06 588,803 1,492,141
Robert E. Brunius 35,000 11% 26.75(3) 05/08/06 588,803 1,492,141
Reed G. Grothe 5,000 2% 26.75(3)(4) 05/08/06 84,115 213,163
</TABLE>
- --------------------
(1) Represents the potential net realizable value of each grant of options
assuming that the market price of the underlying Common Stock appreciates
in value from its fair market value on the date of grant to the end of the
option term at the indicated annual rates. The actual value realized, if
any, on stock option exercises will be dependent upon overall market
conditions and the future performance of the Company and its Common Stock.
There is no assurance that the actual value realized will approximate the
amounts reflected in this table.
(2) The options granted to Messrs. Auth, Wanek, Briskey and Brunius are Series
D Options, while the options granted to Mr. Grothe are Series C Options.
The terms of these options, including the conditions under which they
become exercisable, are described in "Proposal 1--Election of
Directors--Executive Compensation--Incentive Compensation Program."
(3) Represents the fair market value of the Common Stock at the date of grant
as determined by the Board of Directors.
8
<PAGE>
(4) On January 28, 1997, the Board of Directors authorized an exchange of all
Series C Options with an exercise price of $22.75 or higher for new options
in the identical number, but with a new exercise price equal to the market
value of the Common Stock of the Company as of the close of business on
January 28, 1997, and with five-year vesting commencing as of January 28,
1997. Recipients of Series C Options with an exercise price of $22.75 or
higher were given until March 7, 1997, to accept such an exchange.
9
<PAGE>
The following information is furnished with respect to the exercise of stock
options during the year ended December 31, 1996, by the Company's executive
officers named in the Summary Compensation Table and the value at December 31,
1996, of unexercised options held by such individuals. All options were granted
under the Company's Stock Incentive Plan.
AGGREGATED OPTION EXERCISES IN 1996 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Number of Underlying Unexercised Options "In the Money" Options (2)
Shares Acquired Value ------------------------------ --------------------------
Name Upon Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Auth
Series A Options --- $ --- 112,600 --- $1,140,075 $ ---
Series B Options --- --- --- --- --- ---
Series D Options --- --- 259,409 4,000 578,607 ---
Series E Options --- --- 60,000 --- --- ---
Stephen J. Wanek
Series A Options 45,000 $1,294,219 15,200 --- $ 153,900 $ ---
Series B Options --- --- 5,900 --- 44,988 ---
Series D Options --- --- 104,964 1,400 331,822 ---
Series E Options --- --- 20,000 --- --- ---
Charles E. Briskey
Series A Options 52,400 $1,504,394 --- --- $ --- $ ---
Series B Options 1,100 29,700 --- --- --- ---
Series D Options 6,500 193,375 93,918 1,400 231,027 ---
Series E Options --- --- 20,000 --- --- ---
Robert E. Brunius
Series A Options --- $ --- 52,400 --- $ 530,550 $ ---
Series B Options --- --- 1,100 --- 8,388 ---
Series D Options --- --- 100,418 1,400 290,339 ---
Series E Options --- --- 20,000 --- --- ---
Reed G. Grothe
Series C Options --- $ --- 10,600 1,400 --- ---
</TABLE>
- --------------------
(1) These amounts represent the applicable number of shares underlying the
options multiplied by the result obtained by subtracting from the fair
market value of the Common Stock at the time of exercise the per share
exercise prices of the options.
(2) The amounts set forth represent the difference between the $15.125 per
share closing price of the Common Stock as quoted on The Nasdaq National
Market on December 31, 1996, and the exercise price of the options,
multiplied by the applicable number of shares underlying the options.
10
<PAGE>
EMPLOYMENT CONTRACTS
Messrs. Auth, Briskey, Brunius and Durant have entered into compensation
agreements with the Company which provide that their annual base salaries will
be not less than $300,000, $140,000, $140,000 and $100,000, respectively. Such
compensation agreements have no term and provide for severance pay in an amount
equal to six months' base salary if employment is terminated without cause.
These compensation agreements also provide that each executive officer is
eligible for discretionary incentive bonuses and is entitled to receive benefits
that are otherwise provided to employees and/or executives of the Company. As
recipients of Stock Options under the Stock Incentive Plan, each of the
executive officers is also subject to certain non-compete restrictions.
INCENTIVE COMPENSATION PROGRAM
The principal components of the compensation for the Company's senior
officers--I.E., Messrs. Auth, Wanek, Brunius and Briskey (the "Executive
Group")--are base salaries, cash bonuses and stock options. Since the
acquisition of Interactive Technologies by the Company in May 1992, the amount
of the bonuses and the vesting schedule for the stock options have been tied to
the financial performance of the Company according to a formula determined
annually by the Company's Board of Directors.
On May 8, 1996, the Compensation Sub-Committee approved the 1996 incentive
compensation program, consisting of the Executive Group Bonus Plan for Year
Ended December 31, 1996 (the "Bonus Plan"), and the Executive Group Employee
Stock Options, Series D, Acceleration Plan for the Year Ended December 31, 1996
(the "Acceleration Plan"). Messrs. Auth, Wanek, Brunius and Briskey each were
eligible for cash bonuses under the Bonus Plan, the amount of which was
dependent upon the Company's level of net sales and operating profit (before
amortization of intangible assets and before all bonuses awarded to the
Executive Group) in accordance with a formula approved by the Compensation
Sub-Committee. As part of the Acceleration Plan, on May 8, 1996, Messrs. Auth,
Wanek, Brunius and Briskey were granted by the Compensation Sub-Committee Series
D Options for the purchase of an aggregate of 205,000 shares of Common Stock.
Under the Acceleration Plan, currently issued, but not vested, prior issues of
the Series D Options would become vested and immediately exercisable in
accordance with a formula adopted and approved by the Compensation
Sub-Committee. If the formula criteria were not met, the Series D Options that
did not become vested under the Acceleration Plan would become vested on May 8,
2003. Under the Acceleration Plan, Series D Options held by the following
individuals to purchase the following number of shares of Common Stock were
determined by the Compensation Sub-Committee to become vested and immediately
exercisable as of January 1, 1997: Mr. Auth (103,000 shares), Mr. Wanek (36,050
shares), Mr. Briskey (36,050 shares) and Mr. Brunius (36,050 shares). See
"Proposal 1--Election of Directors--Report of the Compensation Committee."
On May 8, 1996, Mr. Grothe was granted by the Compensation Sub-Committee Series
C Options for the purchase of 5,000 shares of Common Stock with an exercise
price of $26.75. One-fifth of such options vest each year on the anniversary
date of the grant until they are fully vested on the fifth such anniversary
date. As previously described herein, all holders of Series C Options with an
exercise price of $22.75 or more were given the right to exchange such options
for new options in the identical number, but with a new exercise price equal to
the market value of the Common Stock as of the close of business on January 28,
1997, and with five-year vesting commencing January 28, 1997. On March 7, 1997,
Mr. Grothe exchanged 7,000 Series C Options with an exercise price of $23.75 (of
which 2,800 would have become vested in April 1997) and 5,000 Series C Options
with an exercise price of $26.75 (of which 1,000 would have become vested in May
1997) for 12,000 new options with an exercise price of $16.50 with five-year
vesting commencing January 28, 1997.
11
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Recommendations regarding compensation paid to the Company's executive officers
in 1996 were made to the Board of Directors by a Compensation Committee
consisting of Thomas L. Auth, W. Wallace McDowell, Jr., Perry J. Lewis and
Sangwoo Ahn; Messrs. McDowell, Lewis and Ahn are non-employee directors of the
Company. Mr. Auth is President and Chief Executive Officer of the Company, and
Mr. Lewis was President of the Company from May 1992 until March 1993.
COMPENSATION OF DIRECTORS
FEES AND REIMBURSEMENT OF EXPENSES
Effective in 1995, the Company's Board of Directors authorized payment to all
non-employee directors who are not affiliated with a major stockholder of the
Company of a $12,000 per year fee, a fee of $750 per meeting attended of the
Board of Directors or a Committee of the Board of which they are members, and
the reimbursement of all out-of-pocket expenses incurred by them in attending
meetings of the Board or Committees of the Board. Non-employee directors who
are affiliated with a major stockholder of the Company are reimbursed for all
out-of-pocket expenses incurred by them in attending meetings of the Board or
Committees of the Board. The Company's non-employee directors who are not
affiliated with a major stockholder of the Company now consist of W. Wallace
McDowell, Jr. and Walter R. Barry, Jr. The other non-employee directors now
consist of Perry J. Lewis, Sangwoo Ahn and William C. Ughetta, Jr. In 1996,
directors' fees of $15,000 were paid to both Mr. McDowell and Mr. Barry.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The following description of the Non-Employee Director Stock Option Plan (the
"Director Plan") is qualified in its entirety by reference to the text of the
Director Plan.
Effective February 3, 1995, and as approved by the Company's stockholders at the
annual meeting of stockholders held on May 10, 1995, Messrs. McDowell, Perry,
Ahn, Ughetta and Barry, as non-employee directors of the Company, each was
granted under the Director Plan a non-qualified option to purchase 7,500 shares
of Common Stock at an exercise price of $25.88 per share, which was the "Fair
Market Value" of the Common Stock on such date as defined in the Director Plan
(consisting of the officially quoted closing price on the date of grant). The
options granted on February 3, 1995, became exercisable to the extent of
one-third of the number of shares underlying each option (or 2,500 shares) on
the date of grant of the options and on the first and second anniversary dates
of the grant of the options. Therefore, as of February 17, 1997, each option
was exercisable to the extent of 7,500 shares. Unless the options are exercised
or terminated at an earlier date pursuant to their terms, they terminate on
February 3, 2000.
The Director Plan is administered by the Board of Directors, which may delegate
its authority to a committee of the Board. Except for decisions regarding who
is eligible to participate in the Director Plan, the number of shares subject to
options granted under the Director Plan, and the exercise price and term of such
options (which are determined pursuant to a formula set forth in the Director
Plan, as described below), the Board of Directors makes any determinations
necessary or advisable for the administration of the Director Plan consistent
with its terms, including when and the terms under which the options will vest.
The Director Plan currently provides for the grant of its options to acquire up
to 75,000 shares of the Company's Common Stock, and a total of 75,000 shares has
been reserved by the Board of Directors for issuance pursuant to options granted
under the Director Plan. As of February 17, 1997, 37,500 shares were
12
<PAGE>
subject to outstanding options, and 37,500 shares were available for future
grants of options under the Director Plan. Only directors that are not
employees of the Company, Interactive Technologies, or any other subsidiary of
the Company ("Non-Employee Directors") are eligible to receive options under the
Director Plan. As of February 17, 1997, there were five Non-Employee Directors
serving on the Company's Board. A Non-Employee Director, upon becoming a
director of the Company, is automatically granted under the Director Plan an
option to purchase 7,500 shares of Common Stock at an exercise price equal to
the "Fair Market Value" of the Common Stock on the date of grant, as the term
"Fair Market Value" is defined in the Director Plan. Options granted under the
Director Plan vest as determined by the Board of Directors at the time of grant.
The Board of Directors, in its sole discretion, may permit a participant under
the Director Plan to surrender to the Company shares of Common Stock previously
acquired by the participant as part or full payment for the exercise of a stock
option, and such surrendered shares would be valued at their Fair Market Value
on the date of exercise. Options granted under the Director Plan are not
intended to be "incentive stock options" within the meaning of the Code.
The Director Plan terminates on February 2, 2005, and no options may be granted
under the Plan after such date.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
As required by rules adopted by the Securities and Exchange Commission ("SEC")
under Section 16(a) of the Securities Exchange Act of 1934, since November 22,
1994, the Company's directors, executive officers and beneficial owners of at
least 10% of the Company's Common Stock have been required to file with the SEC
reports regarding their ownership of the Company's Common Stock and any
subsequent changes in such ownership. Based upon inquiries made by the Company
of its executive officers and directors, and based solely upon copies of such
reports received from the Company's 10% beneficial owners of Common Stock, the
Company believes that during 1996 all of these filing requirements were
satisfied, except that the exercise by W. Wallace McDowell, Jr., Chairman of the
Board and a Director of the Company, of an option to purchase 26,000 shares of
Common Stock of the Company from MLGAL Partners, L.P. on November 18, 1996, was
reported to the SEC under Section 16(a) on December 12, 1996, which was two days
past the due date for such reporting.
REPORT OF THE COMPENSATION COMMITTEE
For 1996 and 1997, the Compensation Committee of the Board of Directors
consisted and consists of Thomas L. Auth, W. Wallace McDowell, Jr., and Perry J.
Lewis. The Compensation Committee is responsible for assuring that compensation
for executives is consistent with the Company's compensation philosophy. The
Compensation Committee also administers and makes grants under the Company's
Stock Incentive Plan with respect to the Company's key employees, although the
Compensation Sub-Committee consisting of Messrs. McDowell and Lewis makes such
determinations under the Stock Incentive Plan with respect to the Company's
executive officers.
The Company's policy with respect to the compensation of executive officers
includes the following beliefs:
1. The Company's compensation system should attract and retain
highly-qualified personnel.
2. Executive compensation should include a significant cash bonus component,
the amount of which should depend on the financial performance of the
Company and the attainment of an executive officer's individual performance
goals on behalf of the Company.
13
<PAGE>
3. Executive compensation should also include a significant incentive-based
equity component in the form of options or other stock awards.
The principal components of compensation for the Company's executive officers
are base salaries, cash bonuses, and stock options. The amounts of the annual
base salaries of the Company's executive officers named in the Summary
Compensation Table were based in part on information regarding the salaries of
executive officers of other companies of a similar size in the security
industry.
The other two components of compensation for the Executive Group--cash bonuses
and stock options--are incentive based and closely tied to the financial
performance of the Company, as determined annually by the Company's Board of
Directors and Compensation Sub-Committee, respectively. As previously described
above in "Proposal 1--Election of Directors--Executive Compensation--Incentive
Compensation Program," on May 8, 1996, the Compensation Sub-Committee approved
the 1996 Bonus Plan and Acceleration Plan, under which the cash bonuses for 1996
were determined. The Compensation Sub-Committee determined the grant and
vesting of options for executive officers under the 1996 Bonus Plan and
Acceleration Plan.
In determining its recommendations for the 1996 Bonus Plan and Acceleration
Plan, the Compensation Committee took into account the overall financial
performance of the Company, the scope of responsibility of a particular
executive officer's position at the Company, and goals regarding the executive
officer's performance on behalf of the Company. All of these factors generally
were weighted equally by the Compensation Committee and the Board.
Messrs. Auth, Wanek, Brunius and Briskey were each eligible for cash bonuses
under the Bonus Plan, the amount of which was determined based on the level of
the Company's net sales and operating profit (before amortization of intangible
assets and before all bonuses awarded to salaried employees). The Bonus Plan
for these four individuals for the year ended December 31, 1996, specifies that,
only if certain levels of net sales and operating profits are achieved by the
Company, then these individuals will be eligible to receive bonuses, the amount
of which then is based on such levels of net sales and operating profit. No
bonuses are paid, and no stock options become vested on an accelerated basis, if
the minimum levels of net sales and operating profits are not reached by the
Company.
As described above, the amount of compensation earned by the Executive Group,
including Mr. Auth, includes two significant incentive-based components, the
amounts of which are closely tied to the Company's financial performance. In
1994 as compared to 1993, both the Company's net sales and its operating profit
(before amortization of intangible assets and before all bonuses awarded to
salaried employees) increased. Thus, for 1994, and in accordance with the Bonus
Plan as determined by the Board of Directors, the executive officers named in
the Summary Compensation Table received an aggregate of $173,250 in bonuses. In
1995 as compared to 1994, both the Company's net sales and its operating profit
(before amortization of intangible assets and before all bonuses awarded to said
officers) increased, and the executive officers named in the Summary
Compensation Table received an aggregate of $306,900 in bonuses. In 1996 as
compared to 1995, both the Company's net sales and its operating profit (before
amortization of intangible assets and before all bonuses awarded to said
officers) increased, and the executive officers named in the Summary
Compensation Table who were eligible under this Plan received an aggregate of
$328,800 in bonuses.
As part of the Acceleration Plan, and as determined by the Compensation
Sub-Committee, on May 8, 1996, Messrs. Auth, Wanek, Brunius and Briskey received
Series D Options to purchase an aggregate of 205,000 shares of Common Stock,
none of which were then exercisable. Under the Acceleration Plan, a Series D
Option to purchase one share of Common Stock becomes vested and exercisable as
of a date determined by the Compensation Sub-Committee. Therefore, effective as
of January 1, 1997, Series D Options, including
14
<PAGE>
Series D Options issued in prior years that have not previously been accelerated
by the Compensation Sub-Committee held by Messrs. Auth, Wanek, Brunius and
Briskey to purchase an aggregate of 211,150 shares of Common Stock, became
exercisable.
Thomas L. Auth, the only member of the Compensation Committee who is an officer
and employee of the Company, participates in the discussions of the Compensation
Committee of his compensation but does not determine the final recommendations
of the Compensation Committee to the Board regarding his compensation.
Recommendations regarding the compensation for Mr. Auth are made by the
non-employee members of the Compensation Committee using a process and
philosophy similar to those used for all other executive officers. The
non-employee members of the Compensation Committee, in making their
recommendations regarding Mr. Auth's compensation, consider, among other things,
the overall performance of the Company along with their own assessment of
Mr. Auth's performance and contributions to the Company. The Compensation
Committee then includes Mr. Auth in the Bonus Plan and Acceleration Plan, which
are later considered by the Board of Directors. The Compensation Sub-Committee
(consisting of non-employee members of the Compensation Committee) makes
decisions regarding the granting of options and other awards under the Stock
Incentive Plan to Mr. Auth and the other executive officers of the Company.
By the 1996 Compensation Committee:
Thomas L. Auth
W. Wallace McDowell, Jr.
Perry J. Lewis
15
<PAGE>
PERFORMANCE GRAPH
The Company's Common Stock has been traded on The Nasdaq National Market since
November 22, 1994. Prior to that date, there was no public market for the
Company's Common Stock. The following graph shows changes during the period
from November 22, 1994, to March 31, 1997, in the value of $100 invested in:
(1) the Company's Common Stock; (2) the Total Return Index for The Nasdaq Stock
Market (U.S.) compiled by the Center for Research in Securities Prices ("CRSP")
at the University of Chicago, Chicago, Illinois; and (3) the CRSP Total Return
Index for Nasdaq Non-Financial Stocks. The values of each investment as of the
dates indicated are based on share prices plus any dividends paid in cash, with
the dividends reinvested on the date they were paid. The calculations exclude
trading commissions and taxes.
11/22/94 12/30/94 12/29/95 12/31/96
-------- -------- -------- --------
Nasdaq (U.S.) $ 100.00 $ 101.54 $ 143.59 $ 176.63
Nasdaq Non-Financial 100.00 101.36 141.25 171.62
ITI Technologies, Inc. 100.00 139.61 183.08 93.08
16
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company as of February 17, 1997,
by (i) each stockholder who is known by the Company to own beneficially more
than 5% of the outstanding Common Stock, (ii) each director (who together
constitute all nominee directors), (iii) each executive officer named in the
Summary Compensation Table, and (iv) all executive officers and directors as a
group.
<TABLE>
<CAPTION>
Name of Beneficial Amount of
Owner of Identity of Group Beneficial Ownership(1)
-------------------------- -----------------------
Shares Percent
------ -------
<S> <C> <C>
MLGAL Partners, L.P.(2)(3). . . . . . . . . . . . . . . . 1,281,159 15.2%
MLGA Fund II, L.P.(2)(3). . . . . . . . . . . . . . . . . 1,281,159 15.2%
Investment Advisors, Inc... . . . . . . . . . . . . . . . 811,400 9.6%
Merrill Lynch & Co., Inc.(4). . . . . . . . . . . . . . . 680,700 8.1%
Merrill Lynch Group, Inc.(4). . . . . . . . . . . . . . . 680,700 8.1%
Princeton Services, Inc.(4) . . . . . . . . . . . . . . . 680,700 8.1%
Fund Asset Management, L.P.(4). . . . . . . . . . . . . . 547,400 6.5%
Merrill Lynch Special Value Fund, Inc.(4) . . . . . . . . 547,400 6.5%
Artisan Partners Limited Partnership(5) . . . . . . . . . 454,000 5.4%
Artisan Investment Corporation(5) . . . . . . . . . . . . 454,000 5.4%
Andrew A. Ziegler(5). . . . . . . . . . . . . . . . . . . 454,000 5.4%
Carlene Murphy Ziegler(5) . . . . . . . . . . . . . . . . 454,000 5.4%
Thomas L. Auth. . . . . . . . . . . . . . . . . . . . . . 671,484(7) 7.6%
Robert E. Brunius . . . . . . . . . . . . . . . . . . . . 253,511(7) 3.0%
Charles E. Briskey. . . . . . . . . . . . . . . . . . . . 156,793(7) 1.8%
Stephen J. Wanek. . . . . . . . . . . . . . . . . . . . . 150,028(7) 1.8%
Perry J. Lewis(6) . . . . . . . . . . . . . . . . . . . . 55,156(7) *
W. Wallace McDowell, Jr.. . . . . . . . . . . . . . . . . 53,500(7) *
Sangwoo Ahn(6). . . . . . . . . . . . . . . . . . . . . . 50,156(7) *
William C. Ughetta, Jr.(6). . . . . . . . . . . . . . . . 16,500(7) *
Walter R. Barry, Jr.. . . . . . . . . . . . . . . . . . . 7,500(7) *
Reed G. Grothe. . . . . . . . . . . . . . . . . . . . . . 4,309(7) *
All executive officers and directors as a
group (13 persons) . . . . . . . . . . . . . . . . . . 1,553,562(7) 16.7%
</TABLE>
- --------------------
* Less than 1%.
(1) Percentages of outstanding shares are based on 8,414,062 shares of Common
Stock outstanding as of February 17, 1997. Shares of Common Stock subject
to options granted under the Company's Stock Incentive Plan which currently
are exercisable, or which become exercisable within 60 days, are deemed
outstanding for computing the number and percentage ownership of the person
holding such options but are not deemed outstanding for computing the
percentages with respect to other persons. Except as otherwise noted, the
persons named in the table and footnotes have sole voting and investment
power with respect to all shares of Common Stock reported as beneficially
owned by them.
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<PAGE>
(2) The business address of MLGAL Partners, L.P. and MLGA Fund II, L.P. is Two
Greenwich Plaza, Greenwich, Connecticut 06830.
(3) MLGAL Partners, L.P., controls MLGA Fund II, L.P., and thus the 1,281,159
shares of Common Stock owned of record by MLGA Fund II, L.P., are also
shown as being owned by MLGAL Partners, L.P.
(4) Merrill Lynch & Co., Inc. and various of its subsidiaries filed a Schedule
13G (the "Merrill Schedule 13G") with the SEC reporting beneficial
ownership of an aggregate of 680,700 shares of Common Stock of the Company.
Three of the persons filing the Merrill Schedule 13G, Merrill Lynch & Co.,
Inc., a Delaware corporation with its principal place of business at World
Financial Center, North Tower, 250 Vesey Street, New York, New York
("ML&Co."), Merrill Lynch Group, Inc., a Delaware corporation with its
principal place of business at World Financial Center, North Tower, 250
Vesey Street, New York, New York ("ML Group"), and Princeton Services,
Inc., a Delaware corporation with its principal place of business at 800
Scudders Mill Road, Plainsboro, New Jersey ("PSI"), are parent holding
companies pursuant to Rule 13d-1(b)(1)(ii)(G) under the Securities Exchange
Act of 1934 (the "1934 Act"). The relevant subsidiaries of ML&Co. are ML
Group and PSI, which is the general partner of Fund Asset Management, L.P.
d/b/a Fund Asset Management ("FAM") and Merrill Lynch Asset Management,
L.P. d/b/a Merrill Lynch Asset Management ("MLAM"). The relevant
subsidiary of ML Group is PSI. ML&Co. may be deemed to be the beneficial
owner of certain of the reported securities of the Company held by or
deemed to be beneficially owned by its control of its wholly-owned
subsidiary, ML Group. ML Group, a wholly-owned direct subsidiary of
ML&Co., may be deemed to be the beneficial owner of certain of the reported
securities of the Company by virtue of its control of its wholly-owned
subsidiary, PSI. PSI, a wholly-owned direct subsidiary of ML Group, may be
deemed to be the beneficial owner of certain of the reported securities of
the Company by virtue of its being the general partner of FAM. FAM, a
Delaware limited partnership with its principal place of business at 800
Scudders Mill Road, Plainsboro, New Jersey, is an investment adviser
registered under Section 203 of the Investment Advisers Act of 1940 (the
"Advisers Act"). FAM may be deemed to be the beneficial owner of certain
of the reported securities of the Company as a result of acting as
investment adviser to one or more investment companies registered under
Section 8 of the Investment Company Act of 1940 (the "Investment Company
Act"), and/or one or more private accounts. One registered investment
company advised by FAM, Merrill Lynch Special Value Fund, Inc., is the
beneficial owner of certain of the reported securities of the Company, and
is a reporting person. MLAM, a Delaware limited partnership with its
principal place of business at 800 Scudders Mill Road, Plainsboro, New
Jersey, is an investment adviser registered under Section 203 of the
Advisers Act. MLAM may be deemed to be the beneficial owner of certain of
the reported securities of the Company as a result of acting as investment
adviser to one or more investment companies registered under Section 8 of
the Investment Company Act, and/or one or more private accounts. Pursuant
to Rule 13d-4 under the 1934 Act, ML&Co., ML Group and PSI disclaim
beneficial ownership of the reported securities of the Company. All of the
foregoing information set forth in this footnote is from the Merrill
Schedule 13G.
(5) A Schedule 13G was filed with the SEC by Artisan Partners Limited
Partnership, Artisan Investment Corporation, Andrew A. Ziegler and Carlene
Murphy Ziegler (the "Artisan Schedule 13G") reporting beneficial ownership
of an aggregate of 454,000 shares of Common Stock of the Company. Artisan
Partners serves as investment adviser to Artisan Funds, Inc. Series
Designated Artisan Small Cap Fund (the "Artisan Fund"). Various of Artisan
Partners' limited partners and employees are also officers and trustees of
the Artisan Fund, but Artisan Partners does not consider the Artisan Fund
to be controlled by such persons. Although the Artisan Fund is not
controlled by
18
<PAGE>
Artisan Partners pursuant to Rule 13d-3(a) under the 1934 Act, the shares
beneficially owned by the Artisan Fund, with respect to which the Artisan
Fund has delegated to Artisan Partners shared voting power and shared
dispositive power, are considered to be shares beneficially owned by
Artisan Partners by reason of such delegated powers. All of the foregoing
information set forth in this footnote is from the Artisan Schedule 13G.
(6) Messrs. Ahn, Lewis, Ughetta, John A. Morgan and Ira Starr may be deemed to
be affiliates of MLGAL Partners, L.P.; Mr. Starr owns no shares of Common
Stock directly. These individuals each disclaims beneficial ownership of
the shares directly owned by MLGAL Partners, L.P. The business address of
these individuals is MLGAL Partners, L.P., Two Greenwich Plaza, Greenwich,
Connecticut 06830.
(7) Includes options granted under the Stock Incentive Plan and the Director
Plan to purchase the following number of shares held by the following
individuals, which options are currently exercisable or will become
exercisable within 60 days of February 17, 1997: Mr. Auth (432,009),
Mr. Brunius (173,918), Mr. Briskey (113,918), Mr. Wanek (146,064), Mr.
McDowell (7,500), Mr. Ahn (7,500), Mr. Lewis (7,500), Mr. Ughetta (7,500),
Mr. Barry (7,500), and Mr. Reichert (4,700), Mr. Grothe (2,800), Mr. Durant
(1,500) and Mr. Paulson (800). The vested options to purchase 7,500 shares
held by Messrs. Ahn, Lewis, Ughetta, McDowell and Barry were granted under
the Director Plan. The business address of Mr. Auth is Interactive
Technologies, Inc., 2266 North Second Street, North St. Paul, Minnesota
55109.
PROPOSAL 2
AMENDMENT OF CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK
DESCRIPTION OF THE PROPOSED AMENDMENT
On January 28, 1997, the Board of Directors unanimously approved and recommended
that the Company's stockholders consider and approve an amendment to the Fifth
Article of the Company's Certificate of Incorporation ("Certificate") to
increase the number of shares of Common Stock which the Company is authorized to
issue from 15,000,000 shares to 30,000,000 shares. The proposed amendment would
become effective upon the filing of a certificate of amendment with the Delaware
Secretary of State. Upon the effectiveness of the proposed amendment, the Fifth
Article of the Company's Certificate of Incorporation would read in its entirety
as follows:
FIFTH: The total number of shares of stock which the Corporation shall
have authority to issue is 30,000,000, and the par value of such shares is
$0.01 per share, amounting in the aggregate to $300,000.
As of April 1, 1997, of the 15,000,000 shares of Common Stock authorized, there
were 8,324,062 shares of Common Stock outstanding, 711,500 shares held as
treasury shares, and 5,921,985 shares reserved for issuance under the Stock
Incentive Plan, the Director Plan and the Stockholder Rights Plan ("Rights
Plan") adopted by the Company in November 1996. The remaining 42,453 shares are
available to be issued by the Company. The proposed additional 15,000,000
shares of Common Stock would be a part of the existing class of Common Stock
and, if and when issued, would have the same rights and privileges as the shares
of Common Stock presently issued and outstanding.
19
<PAGE>
PURPOSES AND EFFECTS OF THE PROPOSED AMENDMENT
The Board of Directors believes that it is important for the Company to have a
sufficient reserve of shares of Common Stock available for the future needs of
the Company. Increasing the number of authorized shares of Common Stock would
provide for a sufficient number of shares for issuance under the Stock Incentive
Plan, the Director Plan and the Rights Plan; would facilitate the acquisition of
other companies, by merger or otherwise; and would make shares available for
other corporate purposes, including any future issuances of Common Stock in
public or private financings, Common Stock dividends and splits, and the
exercise or conversion of any options, warrants, convertible securities or
rights which may hereafter be issued by the Company. Having additional
authorized shares of Common Stock available for issuance in the future will give
the Company greater flexibility without the expense and delay incidental to
obtaining stockholder approval of an amendment to the Certificate increasing the
number of authorized shares at the time of any such action, except as may be
required for a particular issuance by applicable law, rules or regulations.
The Company is seeking to expand through acquisitions in appropriate
circumstances and may use Common Stock in one or more of such acquisitions.
Other than such acquisitions and the issuance of Common Stock upon the exercise
of options granted or to be granted under the Stock Incentive Plan and the
Director Plan and any issuances of shares upon exercise of the Rights granted
under the Rights Plan, there is no present intent to issue shares in public or
private offerings, upon the payment of stock dividends, in stock splits, or upon
the issuance of options, warrants, convertible securities, rights, or any other
issuances involving the Company's Common Stock.
Under certain circumstances, the shares available for additional issuance could
have an adverse effect on the market price and liquidity of the Common Stock or
could make it more difficult for another person or entity to effect a merger
with or otherwise obtain control of the Company. The issuance of the additional
shares by the Board in any public or private sale, merger, or similar
transaction would increase the number of outstanding shares and thereby dilute
the equity interest and voting power of a party attempting to obtain control of
the Company. Also, the additional shares of Common Stock could be privately
placed with purchasers who might side with management of the Company in opposing
a tender offer by a third party. However, the amendment to the Certificate is
not being proposed in response to any effort known to the Company's management
to acquire control of the Company, and the Board of Directors has no present
intention of issuing additional shares for such purpose.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding shares of Common Stock of
the Company is required for approval of the proposed amendment to the
Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF
THE AMENDMENT TO THE CERTIFICATE AS SET FORTH IN PROPOSAL 2.
PROPOSAL 3
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
On March 11, 1997, and subject to the ratification of the holders of the
Company's Common Stock, Coopers & Lybrand L.L.P., who have been the Company's
accountants since 1992, was selected by the Company's Board of Directors as the
independent accountants to audit the Company's consolidated
20
<PAGE>
financial statements for the year ending December 31, 1997. If the holders of
the Common Stock do not ratify the selection of Coopers & Lybrand L.L.P., other
independent accountants will be considered and selected by the Board of
Directors. All proxies received in response to this solicitation will be voted
in favor of the ratification of the appointment of Coopers & Lybrand L.L.P. as
the Company's independent accountants, unless other instructions are indicated
thereon.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at the
Annual Meeting and will have the opportunity to make a statement, if they desire
to do so, and will be available to respond to appropriate questions.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the voting power of the shares present in
person or by proxy at the Annual Meeting and entitled to vote (assuming a quorum
is present) is required to ratify the appointment of Coopers & Lybrand L.L.P. as
the independent accountants for the Company for the year ending December 31,
1997.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE INDEPENDENT
ACCOUNTANTS AS SET FORTH IN PROPOSAL 3.
OTHER BUSINESS
All items of business intended by the management to be brought before the
meeting are set forth in this Proxy Statement, and the management knows of no
other business to be presented. If other matters of business not presently
known to the Board of Directors shall be properly raised at the Annual Meeting,
the person named as the proxies will vote on such matters in accordance with
their best judgment.
FUTURE STOCKHOLDER PROPOSALS
Under the Securities Exchange Act of 1934, the stockholders of the Company have
certain rights to have stockholder proposals included within the Proxy Statement
of the Company for the Company's annual stockholders' meeting in 1998. Any
voting stockholder desiring to submit a proposal for consideration at the 1998
annual meeting should forward the proposal so that it will be received in the
Company's principal executive offices no later than December 12, 1997.
Proposals received by that date that are proper for consideration at the Annual
Meeting and otherwise conform to the rules of the Securities and Exchange
Commission will be included in the 1998 Proxy Statement. Due to the technical
nature of the rights of stockholders and the Company in this area, a stockholder
desiring to make a stockholder proposal should consider consulting his or her
personal legal counsel with respect to such rights.
FINANCIAL INFORMATION
The Company's 1996 Annual Report to Stockholders, including, but not limited to,
the balance sheets as of December 31, 1996, and 1995 and the statements of
income, stockholders' equity and cash flows for the years ended December 31,
1996, 1995 and 1994, accompanies these materials. A copy of the 1996 Annual
Report to Stockholders may be obtained without charge upon request to the
Company. In addition, the Company will provide without charge to any
stockholder solicited hereby, upon written request of such stockholder, a copy
of its Annual Report on Form 10-K for the year ended December 31, 1996, filed
with
21
<PAGE>
the Securities and Exchange Commission. Requests should be directed to Martha
Carlson, ITI Technologies, Inc., 2266 North Second Street, North St. Paul,
Minnesota 55109.
By Order of the Board of Directors
Dated: April 11, 1997 CHARLES A. DURANT
Secretary
22
<PAGE>
PROXY ITI TECHNOLOGIES, INC.
A DELAWARE CORPORATION
2266 NORTH SECOND STREET, NORTH ST. PAUL, MINNESOTA 55109
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Thomas L. Auth and Charles A. Durant, and either of them, are hereby
appointed Proxies, each with the power to appoint his substitute, to represent
and to vote, as designated below, all shares of common stock of ITI
Technologies, Inc. ("Company") held of record by the undersigned on April 7,
1997 at the Annual Meeting of Stockholders to be held on May 22, 1997 or any
adjournment thereof.
1. ELECTION OF FOR all six nominees listed WITHHOLD AUTHORITY
DIRECTORS: below to vote for all nominees
(except as marked to the listed below / /
contrary below). / /
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name below.)
THOMAS L. AUTH, W. WALLACE MCDOWELL, JR., PERRY J. LEWIS, SANGWOO
AHN, WILLIAM C. UGHETTA, JR. AND WALTER R. BARRY, JR.
2. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK TO 30,000,000
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF COOPERS & LYBRAND, L.L.P. AS THE
INDEPENDENT ACCOUNTANT TO AUDIT THE CONSOLIDATED FINANCIAL STATEMENTS OF THE
COMPANY FOR THE YEAR ENDING DECEMBER 31, 1997.
/ / FOR / / AGAINST / / ABSTAIN
In the event of the inability or unwillingness of one or more of the
above-named nominees to serve as a director at the time of the Annual Meeting on
May 22, 1997 or of any adjournments thereof, the shares represented by the
proxies will be voted in favor of the remainder of such nominees and may also,
in the discretion of the holders of said proxies, be voted for other nominees
not named herein in lieu of those unable or unwilling to serve. As of the date
hereof, the Board of Directors knows of no nominee who is unable or unwilling to
serve.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting; management is not
presently aware of any such matters to be presented for action at the Annual
Meeting.
(CONTINUED, AND TO BE COMPLETED AND SIGNED, ON THE REVERSE SIDE)
<PAGE>
(CONTINUED FROM THE OTHER SIDE)
The undersigned hereby ratifies and confirms all the parties shall lawfully
do or cause to be done by virtue hereof and hereby revokes all proxies
previously given to vote such shares.
This Proxy, when properly executed, shall be voted in the manner indicated
by the undersigned stockholder, but if no direction is made, this Proxy will be
voted for the directors named in the Proxy Statement, in favor of the proposed
amendment to the Company's Certificate of Incorporation and in favor of the
proposal to ratify the selection of Coopers & Lybrand, L.L.P. to audit the
consolidated financial statements of the Company for the year ending December
31, 1997.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, guardian, or in some other fiduciary capacity, please give full title
as such.
If a corporation, please sign in
full corporate name by president or
other authorized officer(s). If a
partnership, please sign in
partnership name by authorized
person(s).
Dated:
-----------------------------------,
1997
-----------------------------------
Signature
-----------------------------------
Signature if held jointly
(PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE.)
