<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / 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 ________ 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
2
<PAGE>
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.
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.
3
<PAGE>
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 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
4
<PAGE>
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.
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
------------
Number of
Name and Annual Compensation 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(5) 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.
6
<PAGE>
(5) Mr. Grothe was hired by the Company on February 20, 1995. Accordingly, the
salary and bonus for 1995 represent only a partial year.
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."
8
<PAGE>
(3) Represents the fair market value of the Common Stock at the date of grant
as determined by the Board of Directors.
(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
11
<PAGE>
vested in May 1997) for 12,000 new options with an exercise price of $16.50
with five-year vesting commencing January 28, 1997.
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.
12
<PAGE>
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 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.
13
<PAGE>
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.
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.
14
<PAGE>
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
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.
[GRAPH TO BE INSERTED HERE]
11/22/94 12/30/94 12/29/95 12/31/96 03/31/97
--------- -------- -------- -------- -------
Nasdaq (US) $ 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.
17
<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
18
<PAGE>
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 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 ___________ shares of Common Stock outstanding, ___________ shares
held as treasury shares, and ___________ 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
___________ shares are available to be issued by the Company. The proposed
additional 15,000,000 shares of Common
19
<PAGE>
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.
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
20
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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 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
21
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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 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.)
