SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions 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 12, 1999, AT 8:30 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 12, 1999, at 8:30 o'clock a.m., C.D.T., at the Marquette
Hotel, Seventh Street and Marquette Avenue, Minneapolis, Minnesota 55402, for
the following purposes:
* To elect a Board of Directors.
* To ratify the selection by the Board of Directors of
PricewaterhouseCoopers LLP as the independent accountants to audit
the consolidated financial statements of the Company for the year
ending December 31, 1999.
* 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 March 29, 1999, 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
/s/ Charles A. Durant
----------------------------------------
CHARLES A. DURANT
Secretary
North St. Paul, Minnesota
April 2, 1999
<PAGE>
ITI TECHNOLOGIES, INC.
A DELAWARE CORPORATION
2266 NORTH SECOND STREET
NORTH ST. PAUL, MINNESOTA 55109
651-777-2690
------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1999
------------------------------------
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 12, 1999, at 8:30 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 2, 1999.
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 ratify the selection by the Board of Directors of
PricewaterhouseCoopers LLP as the Company's independent accountants for the year
ending December 31, 1999, and to transact such other business as may properly
come before the Annual Meeting or any adjournments thereof.
The summary annual report of the Company for the year ended December 31, 1998,
and the Annual Report on Form 10-K of the Company for the year ended December
31, 1998, including financial statements, are being mailed to stockholders
simultaneously herewith, but such materials are 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 March 29, 1999,
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 March 29, 1999, and which are entitled to vote at the Annual
Meeting consist of 8,429,042 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; and (ii)
FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for the year ending December 31, 1999. 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 Common
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.
Broker non-votes will be counted for the purposes of determining the presence or
absence of a quorum for the transaction of business, but will not be considered
as votes cast with respect to a particular matter as to which the broker has
expressly not voted. Accordingly, broker non-votes will have no effect upon the
outcome of voting on matters presented to the stockholders at the Annual
Meeting.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
As required by rules adopted by the Securities and Exchange Commission (the
"SEC") under Section 16(a) of the Securities Exchange Act of 1934 (the "1934
ACT"), 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 1998 all of these filing
requirements were satisfied, except that Sangwoo Ahn, a Director of the Company,
did not report the acquisition of 3,000 shares on November 21, 1996, by a trust
for the benefit of his children until June 5, 1998.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company as of February 25, 1999,
by (i) each stockholder who is known by the Company to own beneficially more
than 5% of the outstanding Common Stock, (ii) each director, (iii) each
executive officer named in the Summary Compensation Table, and (iv) all
executive officers and directors as a group.
Name of Beneficial Amount of
Owner of Identity of Group Beneficial Ownership (1)
----------------------------------------- ------------------------
Shares Percent
------ -------
MLGAL Partners, L.P. (2) (3).......................... 1,281,159 15.2%
MLGA Fund II, L.P. (2) (3)............................ 1,281,159 15.2%
Merrill Lynch & Co., Inc. (4)......................... 478,600 5.7%
Merrill Lynch Asset Management Group (4).............. 478,600 5.7%
Artisan Partners Limited Partnership (5).............. 431,400 5.1%
Artisan Investment Corporation (5).................... 431,400 5.1%
Andrew A. Ziegler (5)................................. 431,400 5.1%
Carlene Murphy Ziegler (5)............................ 431,400 5.1%
Fleet Financial Group, Inc. (6)....................... 430,114 5.1%
Thomas L. Auth........................................ 857,256(8) 9.5%
Charles E. Briskey.................................... 130,509(8) 1.5%
Joe Hurst............................................. 57,600(8) *
Perry J. Lewis(7)..................................... 62,656(8) *
W. Wallace McDowell, Jr............................... 61,000(8) *
Sangwoo Ahn(7)........................................ 60,656(8) *
William C. Ughetta, Jr................................ 24,000(8) *
Walter R. Barry, Jr................................... 15,000(8) *
Charles A. Durant..................................... 8,885(8) *
Reed G. Grothe........................................ 10,000(8) *
All executive officers and directors as a
group (14 persons)................................ 1,317,754(8) 14.1%
- -------------------
* Less than 1%.
(1) Percentages of outstanding shares are based on 8,428,642 shares of
Common Stock outstanding as of February 25, 1999. Shares of Common
Stock subject to options granted under the Company's Long-Term Stock
Incentive Plan (1992) (the "STOCK INCENTIVE PLAN") and the Nonemployee
Director Stock Option Plan (the "DIRECTOR PLAN") that currently are
exercisable, or which become exercisable within 60 days, are deemed
outstanding for computing the number and percentage ownership of the
person or group 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.
3
<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. ("ML&CO.") filed a Schedule 13G on behalf of
Merrill Lynch Asset Management Group with the SEC reporting beneficial
ownership of an aggregate of 478,600 shares of Common Stock of the
Company (the "MERRILL SCHEDULE 13G"). ML&Co., a Delaware corporation
with its principal place of business at World Financial Center, North
Tower, 250 Vesey Street, New York, New York, is a parent holding
company pursuant to Rule 13d-1(b)(1)(ii)(G) under the 1934 Act. Merrill
Lynch Asset Management Group is an operating division of ML&Co. and an
investment adviser registered under Section 203 of the Investment
Advisers Act of 1940, consisting of ML&Co.'s indirectly owned asset
management subsidiaries. Merrill Lynch Asset Management, L.P. and Fund
Asset Management, L.P., asset management subsidiaries of ML&Co., hold
certain shares of Common Stock of the Company that are the subject of
the Merrill Schedule 13G. 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 PARTNERS"), Artisan Investment Corporation,
Andrew A. Ziegler and Carlene Murphy Ziegler reporting beneficial
ownership of an aggregate of 431,400 shares of Common Stock of the
Company (the "ARTISAN SCHEDULE 13G"). Artisan Partners serves as
investment adviser to Artisan Funds, Inc., comprised of four series
designated Artisan Small Cap Fund, Artisan International Fund, Artisan
Mid Cap Fund and Artisan Small Cap Value Fund (the "ARTISAN FUNDS").
Various of Artisan Partners' limited partners and employees are also
officers and directors of the Artisan Funds, but Artisan Partners does
not consider the Artisan Funds to be controlled by such persons.
Although the Artisan Funds are not controlled by Artisan Partners
pursuant to Rule 13-d3(a) under the 1934 Act, the shares beneficially
owned by the Artisan Funds, with respect to which the Artisan Funds
have delegated to Artisan Partners shares voting power and shared
dispositive power, are considered to be shares beneficially owned by
Artisan Partners by reason of such delegated powers. Other clients of
Artisan Partners may own shares of Common Stock of the Company that are
not included in the aggregate number of shares reported in the Artisan
Schedule 13G because Artisan Partners does not have or share voting or
investment power over those shares. The business address of Artisan
Partners, Artisan Investment Corporation, Mr. Ziegler and Ms. Ziegler
is 1000 North Water Street, #1770, Milwaukee, Wisconsin 53202. All of
the foregoing information set forth in this footnote is from the
Artisan Schedule 13G.
(6) A Schedule 13G was filed with the SEC by Fleet Financial Group, Inc.,
reporting beneficial ownership of 430,114 shares of Common Stock of the
Company (the "FLEET FINANCIAL SCHEDULE 13G"). Fleet Financial Group,
Inc. is a parent holding company pursuant to Rule 13d-1(b)(ii)(G) under
the 1934 Act. The Fleet Financial Schedule 13G reports shares of Common
Stock of the Company acquired by Fleet Trust & Investment Services
Company, Fleet National Bank and Fleet Investment Advisors, all
subsidiaries of Fleet Financial Group, Inc. The business address of
Fleet Financial Group, Inc. is One Federal Street, Boston,
Massachusetts 02110. All of the foregoing information set forth in this
footnote is from the Fleet Financial Schedule 13G.
(7) Messrs. Ahn, Lewis, and John A. Morgan may be deemed to be affiliates
of MLGAL Partners, L.P. These individuals each disclaim beneficial
ownership of the shares directly owned by MLGAL
4
<PAGE>
Partners, L.P. The business address of these individuals is MLGAL
Partners, L.P., Two Greenwich Plaza, Greenwich, Connecticut 06830.
(8) 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 25, 1999: Mr. Auth
(617,009), Mr. Briskey (123,600), Mr. Hurst (57,600), Mr. McDowell
(15,000), Mr. Ahn (15,000), Mr. Lewis (15,000), Mr. Ughetta (15,000),
Mr. Barry (15,000), Mr. Durant (7,800), Mr. Grothe (8,800), and other
executive officers as a group, 4 persons (26,050). The business address
of Mr. Auth is Interactive Technologies, Inc., 2266 North Second
Street, North St. Paul, Minnesota 55109.
(The remainder of this page was intentionally left blank)
5
<PAGE>
PROPOSALS TO BE ACTED UPON AT THE ANNUAL MEETING
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 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.
Five of the six nominees of the Board of Directors are presently serving as
directors of the Company. The sixth nominee, Joe Hurst, is nominated to fill the
director position currently held by William C. Ughetta, Jr., whose term will
expire May 12, 1999. The names, ages and tenure of all six nominees are as
follows:
Ages Director Since
---- --------------
Thomas L. Auth 54 1992
W. Wallace McDowell, Jr. 62 1992
Perry J. Lewis 61 1992
Sangwoo Ahn 60 1992
Walter R. Barry, Jr. 65 1995
Joe Hurst 48 ---
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 SET FORTH ABOVE.
6
<PAGE>
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 its 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 of the Company on April 1,
1997. Mr. Auth is currently a director, Chief Executive Officer and President of
Interactive Technologies, a director of CADDX Controls, Inc., a wholly owned
subsidiary of the Company ("CADDX"), a director and President and Treasurer of
ITI International, Inc., a wholly owned subsidiary of Interactive Technologies
("ITI International"), and a director and Chief Executive Officer of ITI Finance
Corporation, a wholly owned subsidiary of Interactive Technologies ("ITI
FINANCE"). Mr. Auth also is a director of Ergodyne Corporation, EH Publishing,
Inc., Vomela Specialty Company, and CompU-Shop, Inc., 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 since May 1992 and
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 trustee of Excelsior Funds, a group of
mutual funds registered under the Investment Company Act of 1940, as amended.
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, Chancellor Media Corporation, Stuart Entertainment, Inc., and
Gradall Industries, Inc., which are publicly-held companies.
SANGWOO AHN has been a director of the Company since May 1992. He is 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., which are publicly-held companies.
WALTER R. BARRY, JR. has been a director of the Company since February 1995. Mr.
Barry is a director of Buffets, Inc., a publicly-held company, and he also
serves as a director of St. Cloud Industries, Inc., which is a privately-held
company. Until January 1, 1988, Mr. Barry served as an Executive Vice President
of General Mills, Inc., a manufacturer and marketer of consumer foods.
JOE HURST has been employed by CADDX since 1986 and has been President and a
director of CADDX since 1987. Mr. Hurst has been a Senior Vice President of the
Company since May 22, 1997. Mr. Hurst served as President of the Security
Industry Association, a security industry trade association ("SIA"), from 1993
to 1995.
7
<PAGE>
BOARD ACTIONS AND COMMITTEES
During the fiscal year ended December 31, 1998, the Board of Directors held five
formal meetings and once adopted a written action 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 1998 and 1999 consisted
of and consists of Thomas L. Auth, W. Wallace McDowell, Jr., and Perry J. Lewis.
Messrs. McDowell and Lewis are nonemployee directors of the Company and
constitute the members of the Sub-Committee of the Compensation Committee (the
"SUB-COMMITTEE") that administer certain aspects of the Stock Incentive Plan.
The Compensation Committee makes recommendations to the Board regarding the
compensation of executive officers, and the Compensation Committee and
Sub-Committee administer the Company's Stock Incentive Plan. The Compensation
Committee adopted a written action in lieu of a meeting once during 1998.
The Audit Committee of the Board of Directors for 1998 and 1999 consisted of and
consists of W. Wallace McDowell, Jr., William C. Ughetta, Jr., and Walter R.
Barry, Jr., all of whom are nonemployee directors of the Company. The Audit
Committee annually recommends the 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 1998.
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.
COMPENSATION OF DIRECTORS
FEES AND REIMBURSEMENT OF EXPENSES
Effective in 1995, the Company's Board of Directors authorized payment to all
nonemployee directors who are not affiliated with MLG&A 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. Nonemployee directors who are affiliated with MLG&A 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 nonemployee directors who
are not affiliated with a major stockholder of the Company now consist of W.
Wallace McDowell, Jr., Walter R. Barry, Jr. and William C. Ughetta, Jr. In 1998,
directors' fees of $13,500 were paid to Messrs. McDowell and Barry, and $5,250
to Mr. Ughetta. The other nonemployee directors now consist of Perry J. Lewis
and Sangwoo Ahn.
8
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On January 12, 1999, the Company's Board of Directors authorized payment to all
nonemployee directors, regardless of their affiliation with MLG&A, 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.
DIRECTOR PLAN AND PARTICIPATION IN STOCK INCENTIVE PLAN
The following description of the Director Plan is qualified in its entirety by
reference to the text of the Director Plan.
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 25, 1999, no shares were subject to
outstanding options, and 75,000 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
("NONEMPLOYEE DIRECTORS") are eligible to receive options under the Director
Plan. A Nonemployee 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 Section 422 of the Internal Revenue Code of 1986, as
amended (the "CODE").
The Director Plan terminates on February 2, 2005, and no options may be granted
under the Director Plan after such date.
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, Lewis,
Ahn, Ughetta and Barry, as Nonemployee 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 3, 1997, each such option
was exercisable to the extent of 7,500 shares.
9
<PAGE>
The stated purpose of the Director Plan is to advance the interests of the
Company through the motivation, attraction and retention of its Nonemployee
Directors. In light of this purpose and the substantial reduction in the market
value of the Company's Common Stock following the November 15, 1996,
announcement by the Company that it had received notice from its largest
customer, ADT Security Systems, Inc. ("ADT"), stating that ITI was not then
included in ADT's future strategic product planning and should anticipate a
reduction in purchase orders from ADT during the first quarter of 1997, the
Board of Directors approved on May 22, 1997, the cancellation of options awarded
to date under the Director Plan and the replacement of such options with options
under the Stock Incentive Plan with an exercise price equal to the market value
of the Common Stock of the Company on the close of business on May 22, 1997,
which was $16.00. The Board amended the Stock Incentive Plan to allow awards
thereunder to be made to Nonemployee Directors of the Company, as well as
employees, so that newly issued options under the Stock Incentive Plan could be
exchanged for all options outstanding under the Director Plan as of May 22,
1997.
On May 13, 1998, the Company's Board of Directors awarded each Nonemployee
Director of the Company as of May 14, 1998, options under the Stock Incentive
Plan to purchase 7,500 shares of Common Stock at an exercise price equal to the
fair market value of the Common Stock as of the close of business on May 14,
1998 (I.E., $30.50 per share). These options immediately vested upon award.
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
On March 23, 1999, and subject to the ratification of the holders of the
Company's Common Stock, PricewaterhouseCoopers LLP, which has 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, 1999. If the holders of the Common Stock do not
ratify the selection of PricewaterhouseCoopers LLP, 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 PricewaterhouseCoopers LLP as the Company's
independent accountants, unless other instructions are indicated thereon.
Representatives of PricewaterhouseCoopers LLP 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 PricewaterhouseCoopers LLP
as the independent accountants for the Company for the year ending December 31,
1999.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT
ACCOUNTANTS SET FORTH ABOVE.
10
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Recommendations regarding compensation paid to the Company's executive officers
in 1998 were made to the Board of Directors by a Compensation Committee
consisting of Thomas L. Auth, W. Wallace McDowell, Jr. and Perry J. Lewis.
Messrs. McDowell and Lewis are nonemployee directors of the Company. Mr. Auth is
Chairman of the Board of Directors, Chief Executive Officer and President of the
Company.
INFORMATION REGARDING CERTAIN EXECUTIVE OFFICERS
THOMAS L. AUTH -- See Proposal 1 -- "Election of Directors -- Information
Regarding Nominees for Election as Directors."
JOE HURST -- See Proposal 1 -- "Election of Directors -- Information Regarding
Nominees for Election as Directors."
CHARLES E. BRISKEY has been employed by Interactive Technologies in various
capacities since July 1981. Mr. Briskey has served as Vice President, Operations
of Interactive Technologies since July 1985. He has been an executive officer of
the Company since March 1993. He has been a Senior Vice President of the Company
since March 1996 and Treasurer of the Company since March 1993. He also serves
as a director and Vice President and Secretary of ITI International.
CHARLES A. DURANT has been an employee of the Company and Interactive
Technologies since January 1996. He became Secretary of the Company in March
1996 and was appointed Vice President, General Counsel and Secretary of the
Company in May 1997. Mr. Durant also serves as Vice President, General Counsel
and Secretary of Interactive Technologies, a director, Secretary and Treasurer
of CADDX, and a director, President and Secretary of ITI Finance. From September
1989 until January 1996, he was an attorney at Winthrop & Weinstine, P.A., which
provides legal services to the Company. Prior to entering the legal profession,
he held various accounting positions with Honeywell Inc.
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.
GERALD U. KLASEN has been Vice President, International and Commercial Sales of
Interactive Technologies since March 1997. From 1977 to 1997, he held various
executive positions with Swiss Industrial Group (SIG), Neuhausen, Switzerland,
including Vice President Sales and marketing, SIG North America, Vice President
Sales and Marketing, Doboy Division, and Vice President positions in
administration and human resources. SIG is an international manufacturer and
marketer of sophisticated plant automation equipment.
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
11
<PAGE>
Electric Cooperative Association. From March 1980 to August 1988, he held
various marketing and public relations positions with United Power Association,
a Minnesota utility. Mr. Paulson has been a director of SIA since 1995 and the
Secretary of SIA since September 1998. He is also a director of the Home
Automation Association, a trade association, since February 1999.
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. Mr. Reichert also serves as Vice
President, Finance and Administration of Interactive Technologies and a
director, Vice President and Treasurer of ITI Finance. 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.
BRIAN K. SEEMANN has been employed by Interactive Technologies since August
1995. Mr. Seemann began at Interactive Technologies as Director of Engineering,
Alarm Systems. Since July of 1998, he has served as Vice President of
Engineering of Interactive Technologies. Prior to being employed at the Company,
Mr. Seemann has been employed in various engineering and management capacities
in the utility meter reading (at Itron, Inc. and E.F. Johnson), semiconductor,
process control and aerospace industries (at Rosemount, Inc.).
(The remainder of this page was intentionally left blank)
12
<PAGE>
EXECUTIVE COMPENSATION PROGRAM
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for 1996, 1997
and 1998 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 1998:
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation Number of
Name and --------------------- Stock Options All Other
Principal Position Year Salary Bonus Granted(2) Compensation(3)
------------------ ---- ------ ----- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Thomas L. Auth 1996 $325,000 $156,500(1) 100,000 $2,250
President and Chief 1997 325,000 185,250(1) 100,000 2,400
Executive Officer 1998 350,000 168,000(1) 100,000 2,400
Joe Hurst 1997(4) $116,659 $ 57,000(1) 24,000 $3,000
Senior Vice President 1998 185,280 81,600(1) 35,000 3,000
Charles E. Briskey 1996 $150,000 $ 57,600(1) 35,000 $2,250
Senior Vice President 1997 150,000 68,400(1) 35,000 2,400
1998 160,000 62,400(1) 35,000 2,400
Charles A. Durant 1996 $100,000 $ 13,000(1) 9,500 $ -0-
Vice President , General 1997 110,000 12,975(1) 10,000 825
Counsel and Secretary 1998 125,000 12,500(1) 10,000 2,063
Reed G. Grothe 1996 $110,000 $ 14,300(1) 5,500 $1,039
Vice President, Sales of 1997 115,000 13,375(1) 10,000 1,947
Interactive Technologies 1998 120,000 12,000(1) 8,000 1,798
</TABLE>
- ------------------
(1) Represents bonuses earned for the year shown in the table and paid in
the following year.
(2) Consists of non-qualified stock options granted under the Stock
Incentive Plan.
(3) Other compensation consists of matching contributions made by the
Company on behalf of each of the named individuals under its 401(k)
profit-sharing plans. Salary deferrals into the 401(k) plans are
included in the salary column.
(4) Mr. Hurst became an employee and executive officer of the Company upon
the acquisition of CADDX by the Company on April 30, 1997. Accordingly,
the salary and bonus for 1997 represents only a partial year.
13
<PAGE>
STOCK OPTIONS
As of February 25, 1999, the Stock Incentive Plan provided for the grant of
stock options to acquire up to 2,500,000 shares of Common Stock. As of February
25, 1999, 1,536,529 stock options were outstanding under the Stock Incentive
Plan, consisting of 97,600 Series A Options, 506,020 Series C Options, 757,909
Series D Options, 100,000 Series E Options and 75,000 Series F Options.
As of February 25, 1999, all Series A Options, Series B Options, Series E
Options and Series F Options were exercisable, Series C Options to purchase
126,588 shares of Common Stock were exercisable, and Series D Options to
purchase 751,109 shares of Common Stock 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 stock options.
The following table sets forth information concerning individual grants of all
stock options made during the year ended December 31, 1998, 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(2)
Options Employees Exercise Expiration ----------------------
Name Granted(1) in 1998 Price Date 5% 10%
- ---- ---------- ---------- -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Auth 100,000 29% $30.50(3) 05/14/08 $1,918,128 $4,860,915
Joe Hurst 35,000 10% 30.50(3) 05/14/08 671,345 1,701,320
Charles E. 35,000 10% 30.50(3) 05/14/08 671,345 1,701,320
Briskey
Charles A. 10,000 3% 30.50(3) 05/14/08 191,813 486,091
Durant
Reed G. Grothe 8,000 2% 30.50(3) 05/14/08 153,450 388,873
</TABLE>
- -----------------------------
14
<PAGE>
(1) The Stock Options granted to Messrs. Auth, Hurst, and Briskey are
Series D Options, while the options granted to Messrs. Durant and
Grothe are Series C Options. The terms of these stock options,
including the conditions under which they become exercisable, are
described in "Election of Directors--Executive Compensation--Incentive
Compensation Program."
(2) Represents the potential net realizable value of each grant of stock
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.
(3) Represents the fair market value of the Common Stock at the date of
grant as determined by the Board of Directors.
(The remainder of this page was intentionally left blank)
15
<PAGE>
The following information is furnished with respect to the exercise of stock
options during the year ended December 31, 1998, by the Company's executive
officers named in the Summary Compensation Table and the value at December 31,
1998, of unexercised stock options held by such individuals. All options were
granted under the Company's Stock Incentive Plan.
AGGREGATED OPTION EXERCISES IN 1998 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 --- $ --- 97,600 --- $2,537,600 $ ---
Series D Options --- --- 459,409 4,000 6,220,725 2,000
Series E Options --- --- 60,000 --- 870,000 ---
Joe Hurst
Series D Options --- $ --- 57,600 1,400 $ 403,800 $ 700
Charles E. Briskey
Series D Options --- $ --- 103,600 1,400 $1,114,925 $ 700
Series E Options --- --- 20,000 --- 290,000 ---
Charles A. Durant
Series C Options --- $ --- 3,900 25,600 $ 61,300 $250,200
Reed G. Grothe
Series C Options --- $ --- 4,400 25,600 $ 68,550 $278,200
</TABLE>
- ------------------
(1) These amounts represent the applicable number of shares underlying the
stock 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 stock options.
(2) The amounts set forth represent the difference between the $31.00 per
share closing price of the Common Stock as quoted on The Nasdaq
National Market on December 31, 1998, and the exercise price of the
stock options, multiplied by the applicable number of shares underlying
the options.
EMPLOYMENT CONTRACTS
Messrs. Auth, Briskey 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 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.
16
<PAGE>
In connection with the April 30, 1997, acquisition of CADDX, Mr. Hurst entered
into a one-year employment agreement with CADDX, which provides that his annual
base salary will be $175,000 and that he will be eligible for discretionary
bonus compensation in such amounts as determined from time to time by the Board
of Directors. Subsequent to the initial one-year term of the agreement, CADDX
agreed that Mr. Hurst's annual base salary shall be not less than $175,000 and
he will be eligible for severance pay in an amount equal to six months' base
salary if employment is terminated without cause. Concurrent with execution of
his employment agreement, Mr. Hurst entered into a five-year non-competition
agreement with the Company. As a recipient of stock options under the Stock
Incentive Plan, Mr. Hurst is also subject to additional non-compete
restrictions.
INCENTIVE COMPENSATION PROGRAM
The principal components of the compensation for the Company's senior officers,
who are Messrs. Auth, Hurst 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 14, 1998, the Sub-Committee approved the 1998 incentive compensation
program, consisting of the Executive Group Bonus Plan for Year Ended December
31, 1998 (the "BONUS PLAN"), and the Executive Group Employee Stock Options,
Series D, Acceleration Plan for the Year Ended December 31, 1998 (the
"ACCELERATION PLAN"). Messrs. Auth, Hurst and Briskey each was 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 Sub-Committee. As part of the
Acceleration Plan, on May 14, 1998, Messrs. Auth, Hurst and Briskey were granted
by the Sub-Committee Series D Options for the purchase of an aggregate of
170,000 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
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 April
14, 2005. Under the Acceleration Plan, Series D Options held by the following
individuals to purchase the following number of shares of Common Stock become
vested and immediately exercisable as of January 1, 1999: Mr. Auth (96,000
shares), Mr. Hurst (33,600 shares) and Mr. Briskey (33,600 shares). See
"Election of Directors--Report of the Compensation Committee."
On May 14, 1998, Mr. Durant and Mr. Grothe were granted Series C Options for the
purchase of 10,000 shares of Common Stock and 8,000 shares of Common Stock,
respectively. 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.
(The remainder of this page was intentionally left blank)
17
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
For 1998 and 1999, 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
Sub-Committee consisting of Messrs. McDowell and Lewis makes such determinations
under the Stock Incentive Plan with respect to the Company's executive officers.
EXECUTIVE COMPENSATION
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.
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 the Sub-Committee, respectively. As previously described above in
"Executive Compensation -- Incentive Compensation Program," on May 13, 1998, the
Sub-Committee approved the 1998 Bonus Plan and Acceleration Plan, under which
the cash bonuses for 1998 were determined. The Sub-Committee determined the
grant and vesting of stock options for executive officers under the 1998 Bonus
Plan and Acceleration Plan.
In determining its recommendations for the 1997 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, Hurst 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 three individuals for the year ended December 31, 1998, 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
18
<PAGE>
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. Based
upon the Company's 1998 net sales of $109 million and operating profit of $23.1
million (before amortization of intangible assets and before all bonuses awarded
to said officers), the executive officers named in the Summary Compensation
Table who were eligible under the Bonus Plan received an aggregate of $312,000
in bonuses for 1998 (paid in 1999).
As part of the Acceleration Plan, and as determined by the Sub-Committee, on May
14, 1998, Messrs. Auth, Hurst and Briskey received Series D Options to purchase
an aggregate of 170,000 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 Sub-Committee. Therefore, effective as of January 1, 1999, Series D Options,
including Series D Options issued in prior years that have not previously been
accelerated by the Sub-Committee held by Messrs. Auth, Hurst and Briskey to
purchase an aggregate of 163,200 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
nonemployee members of the Compensation Committee using a process and philosophy
similar to those used for all other executive officers. The nonemployee 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 Sub-Committee (consisting of nonemployee 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.
Members of the Compensation Committee:
Thomas L. Auth
W. Wallace McDowell, Jr.
Perry J. Lewis
19
<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 December 31, 1999, 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.
[PLOT POINT CHART]
<TABLE>
<CAPTION>
11/22/94 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CRSP Nasdaq (U.S.) $100.00 $101.537 $143.609 $176.598 $216.365 $304.885
Nasdaq Non-
Financial Stocks 100.00 101.309 141.205 171.550 200.934 294.996
ITI Technologies, Inc. 100.00 139.618 183.077 93.077 133.846 190.769
</TABLE>
20
<PAGE>
OTHER BUSINESS
All items of business intended by management to be brought before the meeting
are set forth in this Proxy Statement, and 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 persons named
as the proxies will vote on such matters in accordance with their best judgment.
FUTURE STOCKHOLDER PROPOSALS
Under the 1934 Act, the Company's stockholders may submit proposals to be
considered at an annual stockholders' meeting. Rule 14a-8 under the 1934 Act
sets forth the procedure and requirements for requesting that the Company
include these proposals in its proxy statement. However, a stockholder may
submit proposals to be voted on at an annual meeting without having the
proposals included in the Company's proxy statement. These proposals are known
as "non-Rule 14a-8 proposals."
Rule 14a-4(c)(1) under the 1934 Act states when the proxies named by a company
for an annual meeting may exercise their discretionary voting powers for
proposals not included in the company's proxy statement, including non-Rule
14a-8 stockholder proposals. Rule 14a-4(c)(1) was recently amended to provide
that proxies named by a company to vote at an annual meeting may be given
discretionary authority to vote all proxies with respect to any non-Rule 14a-8
proposals that properly come before the annual meeting for a vote of the
stockholders if (i) the company has not received advance notice of the proposal
at least 45 days before the date on which the company first mailed its proxy
materials for the prior year's annual stockholders' meeting, and (ii)
stockholders have been notified by the company of this 45-day advance notice
requirement.
The Company hereby notifies its stockholders that for the annual meeting of
stockholders expected to be held in May 2000, the deadline for notifying the
Company of any non-Rule 14a-8 stockholder proposals is February 16, 2000. Notice
of any such proposal must be given in writing to the Secretary of the Company,
Mr. Charles A. Durant, ITI Technologies, Inc., 2266 Second Street North, North
St. Paul, Minnesota 55109. Therefore, the Company's proxies will be able to
exercise their discretionary voting authority with respect to any non-Rule 14a-8
proposal not submitted to the Company or submitted to the Company after February
16, 2000.
The notification deadline for stockholders wishing to have a Rule 14a-8 proposal
considered for inclusion in the Company's proxy solicitation materials for the
Annual Meeting of Stockholders to be held in 2000 is December 2, 1999, as set
forth in the Company's Proxy Statement dated April 3, 1998. Such proposals must
be set forth in writing and received by the Secretary of the Company, Mr.
Charles A. Durant, at the above address on or before December 2, 1999.
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 1998 Summary Annual Report to Stockholders and the Company's
Annual Report on Form 10-K, including, but not limited to, consolidated balance
sheet as of December 31, 1998, and 1997 and the
21
<PAGE>
consolidated statements of operations, stockholders' equity and cash flows for
the years ended December 31, 1998, 1997 and 1996, accompany these materials. A
copy of the 1998 Summary Annual Report to Stockholders and a copy of its Annual
Report on Form 10-K for the year ended December 31, 1998, as filed with the
Securities and Exchange Commission may be obtained without charge upon written
request to the Company. Requests should be directed to Kenneye Thompson, ITI
Technologies, Inc., 2266 North Second Street, North St. Paul, Minnesota 55109.
By Order of the Board of Directors
/s/ Charles A. Durant
-----------------------------------------
Dated: April 2, 1999 CHARLES A. DURANT
Secretary
22
<PAGE>
ITI TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, MAY 12, 1999
8:30 A.M.
MARQUETTE HOTEL
SEVENTH STREET AND MARQUETTE AVENUE
MINNEAPOLIS, MN 55402
- --------------------------------------------------------------------------------
ITI TECHNOLOGIES, INC.
A DELAWARE CORPORATION
2266 NORTH SECOND STREET, NORTH ST. PAUL, MINNESOTA 55109 PROXY
- --------------------------------------------------------------------------------
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, all shares of common stock of ITI Technologies, Inc.
("Company") held of record by the undersigned on March 29, 1999 at the Annual
Meeting of Stockholders to be held on May 12, 1999 or any adjournment thereof.
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 12,
1999 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.
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, and in favor of the
proposal to ratify the selection of PricewaterhouseCoopers LLP to audit the
consolidated financial statements of the Company for the year ending December
31, 1999.
CONTINUED, AND TO BE COMPLETED AND SIGNED, ON THE REVERSE SIDE.
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to ITI Technologies, Inc., c/o Shareowner Services-,
P.O. Box 64873, St. Paul, MN 55164-0873.
PLEASE FOLD HERE
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Election of Directors:
01 Thomas L. Auth 04 Sangwoo Ahn [ ] FOR all six nominees listed [ ] WITHHOLD AUTHORITY
02 W. Wallace McDowell, Jr. 05 Walter R. Barry, Jr. at left (except as marked to to vote for all nominees
03 Perry J. Lewis 06 Joe Hurst the contrary). listed at left.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, ----------------------------------------------------
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
----------------------------------------------------
2. Proposal to ratify the selection of PricewaterhouseCoopers LLP as the
Independent Accountant to audit the consolidated financial statements
of the Company for the year ending December 31, 1999. [ ]For [ ] Against [ ] Abstain
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.
(PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED ENVELOPE.)
Dated: -------------------------------------- , 1999
Address Change? Mark Box [ ] Indicate changes below:
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Signature(s) in Box
Please sign exactly as name appears to the left.
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 presient or other authorized officer(s). If a
partnership, please sign in partnership name by
authorized person(s).
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