<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PITTWAY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
PITTWAY CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[PITTWAY LOGO]
200 South Wacker Drive
Chicago, Illinois 60606-5802
- ------------------------------------------
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD
ON MAY 11, 1995
- ------------------------------------------
TO THE STOCKHOLDERS:
The annual meeting of stockholders of Pittway Corporation will be held on
Thursday, May 11, 1995 at 9:30 A.M., local time, at the Seven Continents Skybird
Meeting Center, Rotunda Building, O'Hare International Airport, Chicago,
Illinois, for the following purposes:
1. To elect directors for the ensuing year.
2. To transact such other business as may properly be brought before the
meeting.
The annual meeting may be postponed or adjourned from time to time without any
notice other than announcement at the meeting, and any and all business for
which notice is hereby given may be transacted at any such postponed or
adjourned meeting.
The Board of Directors has fixed the close of business on March 31, 1995 as the
record date for determination of stockholders entitled to notice of and to vote
at the meeting.
A list of stockholders entitled to vote at the annual meeting will be available
for examination by any stockholder, for any purpose germane to the meeting,
during ordinary business hours at the Company's principal executive offices, 200
South Wacker Drive, Suite 700, Chicago, Illinois 60606-5802 during the ten days
preceding the meeting.
Stockholders are requested to complete and sign the enclosed proxy, which is
solicited by the Board of Directors, and promptly return it in the accompanying
envelope.
BECAUSE TWO CLASSES OF STOCK OF THE COMPANY ARE OUTSTANDING, A SEPARATE FORM OF
PROXY HAS BEEN PREPARED WITH RESPECT TO EACH CLASS OF STOCK: A WHITE PROXY WHICH
RELATES TO THE COMPANY'S COMMON STOCK AND A BLUE PROXY WHICH RELATES TO THE
COMPANY'S CLASS A STOCK. STOCKHOLDERS WHO OWN OF RECORD SHARES OF ONLY ONE CLASS
ARE BEING FURNISHED ONLY WITH THE PROXY RELATING TO THAT CLASS. STOCKHOLDERS WHO
OWN OF RECORD SHARES OF BOTH CLASSES ARE BEING FURNISHED WITH BOTH PROXIES (IN
SEPARATE MAILINGS, EACH OF WHICH ALSO INCLUDES A COPY OF THIS NOTICE AND THE
PROXY STATEMENT). STOCKHOLDERS WHO RECEIVE BOTH PROXIES MUST COMPLETE, SIGN AND
RETURN BOTH PROXIES IN ORDER FOR THE SHARES OF BOTH CLASSES TO BE VOTED BY
PROXY.
By Order of the Board of Directors
NICHOLAS J. CACCAMO
Secretary
Chicago, Illinois
April 7, 1995
<PAGE> 3
[PITTWAY LOGO]
- ------------------------------------------
PROXY STATEMENT
- ------------------------------------------
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Pittway Corporation (herein called the "Company") of
proxies for use at the annual meeting of stockholders to be held on Thursday,
May 11, 1995 and at any postponement or adjournment thereof. All shares of
Common Stock and Class A Stock entitled to vote at the annual meeting which are
represented by properly executed proxies will, unless such proxies have been
revoked, be voted in accordance with the instructions given in such proxies or,
if no contrary instructions are given therein, will be voted in the election of
directors as described under "Election of Directors" and as to any other matters
that may properly be presented to the meeting will be voted as described under
"Other Matters." Any stockholder who has given a proxy with respect to any
matter may revoke it at any time prior to the closing of the polls as to that
matter at the annual meeting by delivering a notice of revocation or a duly
executed proxy bearing a later date to the Secretary of the Company, or by
attending the annual meeting and voting in person.
Proxy statements and proxies are being mailed to stockholders on or about April
7, 1995. The mailing address of the principal executive offices of the Company
is 200 South Wacker Drive, Suite 700, Chicago, Illinois 60606-5802.
The Company was formerly named Standard Shares, Inc. The Company changed its
name to Pittway Corporation in connection with the December 28, 1989 merger (the
"Merger") into the Company of Pittway Corporation, a Pennsylvania corporation
("Pennsylvania Pittway") 50.1% of which was owned by the Company.
The Company had outstanding on March 31, 1995, the record date for the annual
meeting, 2,626,024 shares of Common Stock and 11,314,700 shares of Class A
Stock. Both classes are traded on the American Stock Exchange.
Pursuant to the Company's Restated Certificate of Incorporation, as amended,
prior to the Change of Control Date (as defined therein) generally the holders
of Class A Stock voting as a class are entitled to elect such number of
directors, but not less than two, as equal 25% of the total number of directors
constituting the full Board of Directors and the holders of Common Stock voting
as a class are entitled to elect the remaining directors, and with respect to
all other matters voted upon by the stockholders of the Company, the holders of
Common Stock are entitled to one vote per share of Common Stock and the holders
of Class A Stock are entitled to one-tenth of one vote per share of Class A
Stock.
Subject to certain exceptions, the "Change of Control Date" is defined as the
first date on which the shares of Harris Group Stock (as defined below) are
entitled to cast fewer than 1,496,110 votes (counting the Class A Stock as
entitled to cast one-tenth of one vote per share for this purpose). "Harris
Group Stock" means, at any point in time, shares of Common Stock and Class A
Stock which, at such time, any member of the "Harris Group" (as defined below),
either alone or in combination with any other member or members of the Harris
Group, directly or indirectly beneficially owns (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as such Rule was in effect and interpreted
at 5:00 P.M. Central Standard Time on December 28, 1989), without taking into
account any shares of Common Stock acquired by any member of the Harris Group
subsequent to May 31, 1989 in excess of shares of Common Stock disposed of by
members of the Harris
1
<PAGE> 4
Group subsequent to such date. The "Harris Group" means Messrs. Irving B.
Harris, Neison Harris, King Harris, William W. Harris and Sidney Barrows, and
their respective spouses, descendants and spouses of descendants, trustees of
trusts established for the benefit of such persons, and executors of estates of
such persons. Irving B. Harris and Neison Harris are brothers and Sidney Barrows
is their brother-in-law. William W. Harris is the son of Irving B. Harris and
King Harris is the son of Neison Harris.
So long as the Change of Control Date does not occur prior to the annual meeting
(which the Company believes to be a reasonable assumption), at the meeting the
holders of Class A Stock voting as a class will be entitled to elect three
directors, the holders of Common Stock voting as a class will be entitled to
elect eight directors, and the holders of Common Stock will be entitled to one
vote per share of Common Stock and the holders of Class A Stock to one-tenth of
one vote per share of Class A Stock with respect to any other business as may
properly be brought before the meeting.
Under the Company's By-Laws, attendance at the meeting in person or by proxy by
the holders of Class A Stock entitled to cast at least a majority of the votes
which the Class A Stock is entitled to cast at the meeting is required in order
to establish a quorum for the purpose of electing the directors to be elected by
the Class A Stock, attendance at the meeting in person or by proxy by the
holders of Common Stock entitled to cast at least a majority of the votes which
the Common Stock is entitled to cast at the meeting is required in order to
establish a quorum for the purpose of electing the directors to be elected by
the Common Stock, and attendance at the meeting in person or by proxy by the
holders of Common Stock and Class A Stock entitled to cast at least a majority
of the votes which such stock is entitled to cast at the meeting on matters
other than the election of directors is required in order to establish a quorum
for the purpose of any other business.
Pursuant to Delaware law, shares entitled to cast votes on a matter at the
meeting which are the subject of an ABSTAIN on that matter will be treated for
all purposes relevant to that matter as being present at the meeting and
entitled to vote and thus will have the same effect as a vote of such shares
against that matter. Shares entitled to cast votes on a matter at the meeting
which are the subject of a broker non-vote on that matter will be treated for
quorum purposes relevant to that matter as being present at the meeting and
entitled to vote but will not be so treated in determining whether a majority or
other required percentage of the "shares present and entitled to vote" on that
matter has been obtained.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership (as such term is used in Section 13(d) of the Securities Exchange Act
of 1934 (the "Exchange Act")) as of March 31, 1995 of Common Stock and Class A
Stock by (a) the persons known by the Company to be the beneficial owners of
more than 5% of the outstanding shares of Common Stock or Class A Stock, (b)
each director of the Company, (c) each of the executive officers of the Company
listed in the Summary Compensation Table, (d) all directors and executive
officers of the Company as a group, and (e) the current members of the Harris
Group. The information set forth in the table as to directors and executive
officers is based upon information furnished to the Company by them in
connection with the preparation of this Proxy Statement. Except where
2
<PAGE> 5
otherwise indicated, the mailing address of each of the stockholders named in
the table is: c/o Pittway Corporation, 200 South Wacker Drive, Suite 700,
Chicago, Illinois 60606-5802.
<TABLE>
<CAPTION>
PERCENT OF
OUTSTANDING
NUMBER OF PERCENT OF NUMBER OF PERCENT OF VOTES ON
SHARES OF OUTSTANDING SHARES OF OUTSTANDING MATTERS OTHER
COMMON SHARES OF CLASS A SHARES OF THAN ELECTION
NAME STOCK(1) COMMON STOCK STOCK(1) CLASS A STOCK OF DIRECTORS
- --------------------------------------- --------- ------------ --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
William Harris Investors, Inc.(2)(3)... 817,257 31.1% 1,187,665 10.5% 24.9%
2 North LaSalle Street
Suite 400
Chicago, Illinois 60602
Mario J. Gabelli et at.(4)............. 520,500 19.8 3,347,544 29.6 22.8
One Corporate Center
Rye, New York 10580
American National Bank and Trust
Company of Chicago(5).................. 172,896 6.6 272,631 2.4 5.3
33 North LaSalle Street
Chicago, Illinois 60690
Irving B. Harris(3)(6)................. 817,257 31.1 1,187,665 10.5 24.9
King Harris(3)(7)(16).................. 366,610 14.0 615,645 5.4 11.4
Neison Harris(3)(8).................... 275,153 10.5 479,690 4.2 8.6
Sidney Barrows(3)(9)................... 25,694 1.0 41,881 .4 .8
William W. Harris(3)(10)............... 817,257 31.1 1,187,665 10.5 24.9
Eugene L. Barnett(11).................. 400 * 652 * *
Fred Conforti(12)(16).................. 2,600 .1 40,200 .4 .2
E. David Coolidge III.................. None -- 5,000 * *
Anthony Downs.......................... 1,100 * 4,793 * *
Leo A. Guthart(13)(16)................. None -- 59,171 .5 .2
Jerome Kahn, Jr.(3)(14)................ 817,437 31.1 1,187,958 10.5 24.9
Sal F. Marino(16)...................... None -- 33,201 .3 .1
Daniel J. Ramella(15)(16).............. None -- 7,439 .1 *
All Directors and Executive Officers of
the Company as a group
(16 persons)(16)(17)................. 1,387,723 52.8 2,344,717 20.7 43.2
The Current Harris Group(3)............ 1,385,334 52.8 2,157,576 19.1 42.6
</TABLE>
- ------------
* Less than one-tenth of one percent.
(1) Except as otherwise indicated below, beneficial ownership means the sole
power to vote and dispose of shares.
(2) The information as to William Harris Investors, Inc. ("WHI") is derived in
part from statements, as amended February 14, 1995, filed with the
Securities and Exchange Commission (the "Commission") pursuant to Section
13(g) of the Exchange Act. Such statements, together with advice furnished
to the Company separately by WHI, disclose that (i) WHI, an investment
adviser registered under the Investment Advisers Act of 1940, holds all such
shares on behalf, and in terminable discretionary accounts, of Irving B.
Harris, William W. Harris, Sidney Barrows and certain other members of the
Harris Group, (ii) WHI shares voting power with such persons, and has sole
dispositive power, with respect to all such shares, (iii) Irving B. Harris
and his children (including William W. Harris) are the sole stockholders,
and Irving B. Harris and William W. Harris are the controlling stockholders,
of WHI and (iv) Irving B. Harris, William W. Harris and Jerome Kahn, Jr.
are, respectively, the Chairman, the President and a Vice President of WHI.
3
<PAGE> 6
(3) The information as to the Current Harris Group (as defined below), Irving
B. Harris, King Harris, Neison Harris, Sidney Barrows and William W. Harris
is derived in part from statements, as amended January 15, 1990, filed with
the Commission pursuant to Section 13(d) of the Exchange Act and
statements, as amended November 15, 1991, filed with the Commission
pursuant to such Section. Such statements were filed on behalf of such
persons as well as those other persons and entities who are currently
members of the Harris Group beneficially owning, directly or indirectly,
shares of Common Stock or Class A Stock (collectively referred to as the
"Current Harris Group"). Such statements disclose that, because of the
relationships among members of the Current Harris Group, such persons may
be deemed to be a group within the meaning of Section 13(d) of the Exchange
Act and the rules and regulations thereunder. Jerome Kahn, Jr. may also be
deemed to be a member of any such group. Irving B. Harris, King Harris,
Neison Harris, Sidney Barrows, William W. Harris and Jerome Kahn, Jr. may
be deemed in control of the Company by reason of beneficial ownership of
stock of the Company by themselves and other members of the Current Harris
Group and by reason of their positions with the Company and its
subsidiaries. The aggregate number of outstanding shares which may be
deemed to be beneficially owned by the Current Harris Group includes all
the shares shown in this table for WHI, American National Bank and Trust
Company of Chicago, Irving B. Harris, King Harris, Neison Harris, Sidney
Barrows and William W. Harris. Total excludes duplication of shares within
the Current Harris Group. Addition of the shares beneficially owned by
Jerome Kahn, Jr. separate from WHI would not affect the percentages of
outstanding shares or outstanding votes shown for the Current Harris Group.
(4) The information as to Mario J. Gabelli and entities controlled directly or
indirectly by Mr. Gabelli is derived from statements, as amended November
15, 1994 and February 21, 1995, filed with the Commission pursuant to
Section 13(d) of the Exchange Act. Such statements disclose that (i) Mr.
Gabelli is the chief investment officer for most of the entities signing
such statements and is deemed to have beneficial ownership of the shares
beneficially owned by all such entities, (ii) Mr. Gabelli and such entities
do not admit that they constitute a group within the meaning of Section
13(d) of the Exchange Act and the rules and regulations thereunder and
(iii) Mr. Gabelli and such entities have the sole power to vote and dispose
of all the shares of which they are beneficial owners (unless the aggregate
voting interest of all such entities exceeds 25% of the Company's total
voting interest or other special circumstances exist, in which case the
proxy voting committees of certain of such entities would have the sole
power to vote certain of 147,700 shares of Common Stock and 877,000 shares
of Class A Stock) except 41,800 shares of Common Stock and 267,879 shares
of Class A Stock as to which they have no voting power.
(5) The information as to American National Bank and Trust Company of Chicago
("ANB") is derived in part from a statement, dated February 10, 1995, filed
with the Commission pursuant to Section 13(g) of the Exchange Act. Such
statement discloses that (i) ANB is the beneficial owner of all such shares
as co-trustee of trusts created by Neison Harris, (ii) ANB has no voting
power with respect to such shares and shares dispositive power with its co-
trustees, King Harris and another member of the Harris Group, and (iii) ANB
is a wholly-owned subsidiary of American National Corporation, which in
turn is a wholly-owned subsidiary of First Chicago Corporation.
(6) Consists of the shares held by WHI (of which Irving B. Harris is a
controlling stockholder), certain of which are held by WHI for the account
of Mr. Harris or would otherwise be deemed beneficially owned by him
without regard to WHI. As set forth in note (2), the voting power of the
shares held by WHI is shared by WHI with the respective persons for whose
account they are held and WHI has sole dispositive power with respect to
such shares.
(7) King Harris shares the power to vote and dispose of 345,464 of such shares
of Common Stock and 535,585 of such shares of Class A Stock (including in
each case all shares listed in the table for ANB). Includes 10,250 shares
of Class A Stock which Mr. Harris has the right to acquire within 60 days
through the exercise of options awarded under the Company's 1990 Stock
Awards Plan.
(8) Neison Harris shares the power to vote and dispose of 105,993 of such
shares of Common Stock and 214,975 of such shares of Class A Stock. He also
shares with another member of the Current Harris Group the power to dispose
of, but not vote, an additional 30,500 shares of Common Stock and 38,700
shares of Class A Stock.
(9) Does not include 81,200 shares of Common Stock and 132,356 shares of Class
A Stock owned by Mr. Barrows' wife, as to which shares he disclaims
beneficial ownership. Includes 8,994 shares of Common Stock and 14,660
shares of Class A Stock held by WHI for the account of Mr. Barrows. As set
forth in note (2), the voting power of such shares
4
<PAGE> 7
is shared by WHI with Mr. Barrows and WHI has sole dispositive power with
respect to such shares. Mr. Barrows shares the power to vote and dispose
of the shares not held by WHI.
(10) Consists of the shares held by WHI (of which William W. Harris is a
controlling stockholder), certain of which are held by WHI for the account
of Mr. Harris or would otherwise be deemed beneficially owned by him
without regard to WHI. As set forth in note (2), the voting power of the
shares held by WHI is shared by WHI with the respective persons for whose
account they are held and WHI has sole dispositive power with respect to
such shares.
(11) Eugene Barnett shares power to vote and dispose of all such shares.
(12) Does not include 6,000 shares of Class A Stock owned by Mr. Conforti's
wife, as to which shares he disclaims beneficial ownership. Includes 37,735
shares of Class A Stock as to which he shares voting and dispositive power.
(13) Includes 18,939 shares of Class A Stock as to which Mr. Guthart shares
voting and dispositive power.
(14) Includes the shares held by WHI, with respect to which Mr. Kahn acts as
portfolio manager, and 180 shares of Common Stock and 293 shares of Class A
Stock held by Mr. Kahn. As set forth in note (2), the voting power of the
shares held by WHI is shared by WHI with the respective persons for whose
account they are held and WHI has sole dispositive power with respect to
such shares.
(15) Mr. Ramella shares power to vote and dispose of 7,148 of such shares.
(16) Includes shares of Class A Stock beneficially owned as of December 31, 1994
through participation in the Company's salary reduction plan (such date
being the most recent date for which information regarding account balances
under such plan is available).
(17) Includes 960,586 shares of Common Stock and 1,483,813 shares of Class A
Stock as to which voting power is shared other than with directors and
officers of the Company and 991,086 shares of Common Stock and 1,522,513
shares of Class A Stock as to which dispositive power is so shared.
Includes 12,300 shares of Class A Stock which officers of the Company have
the right to acquire within 60 days through the exercise of options awarded
under the Company's 1990 Stock Awards Plan. Total excludes duplication of
shares within such group.
ELECTION OF DIRECTORS
Eleven directors are to be elected to serve until the next annual meeting of
stockholders and until their respective successors shall be elected and
qualified. Three of such directors are to be elected by the Class A Stock voting
as a class and the remaining eight directors are to be elected by the Common
Stock voting as a class. The directors to be elected by a particular class will
be elected by plurality of the votes cast FOR directors of such class. Except to
the extent that stockholders voting in a particular class indicate otherwise on
their proxies solicited by the Company's Board of Directors relating to such
class, the holders of such proxies intend to vote such proxies for the election
as directors of the persons named in the following table as nominees for
election by such class (all of whom are now serving as directors elected by such
class), provided that if any of the nominees for election by such class shall be
unable or shall fail to act as such by virtue of an unexpected occurrence, such
proxies will be voted for such other person or persons as shall be determined by
the holders of such proxies in their discretion or, so long as such action does
not conflict with the provisions of the Company's Restated Certificate of
Incorporation, as amended, relating to the proportion of directors to be elected
by the Class A Stock, the Board of Directors may, in its discretion, reduce the
number of directors to be elected.
5
<PAGE> 8
NOMINEES FOR ELECTION BY THE HOLDERS OF CLASS A STOCK
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NOMINEE SINCE AGE AND DIRECTORSHIPS
- --------------------------------------------- -------- --- ---------------------------------------------
<S> <C> <C> <C>
Eugene L. Barnett(A)......................... 1980 67 Retired; Consultant from March 1991 to April
1993 to, prior thereto Chairman and Chief
Executive Officer of, The Brand Companies,
Inc. (specialty contractor); Vice President
of the Company from 1979 to 1993; Director,
AptarGroup, Inc. (specialty packaging
components manufacturer) and National
Service Corporation (specialty contractor)
E. David Coolidge III(A)(N).................. 1994 51 Managing Partner since January 1995 of, prior
thereto Manager of Corporate Finance
Department of, William Blair & Company
(investment banker), Partner therein since
prior to 1990; Director, United Stationers,
Inc. (office supplies distributor)
Anthony Downs(A)(C).......................... 1971 64 Senior Fellow, Brookings Institution
(non-profit social policy research center)
since prior to 1990; Consultant since 1991;
Director, Bedford Properties, Inc. (real
estate investment trust), General Growth
Properties, Inc. (real estate investment
trust) and Massachusetts Mutual Life
Insurance Corporation (insurance company)
</TABLE>
NOMINEES FOR ELECTION BY THE HOLDERS OF COMMON STOCK
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NOMINEE SINCE AGE AND DIRECTORSHIPS
- -------------------------------------------- -------- --- --------------------------------------------
<S> <C> <C> <C>
Sidney Barrows(E)+.......................... 1963 76 Of counsel since January 1994 to, prior
thereto shareholder in, law firm of Leonard,
Street and Deinard, Minneapolis,
Minnesota; Vice Chairman of the Board of
the Company since the Merger; Vice
President of the Company from 1963 to the
Merger; Treasurer of the Company from 1974
to the Merger
Fred Conforti............................... The 53 President of Pittway Systems Technology
Merger* Group (division of Pennsylvania Pittway
until the Merger, division of the Company
since the Merger); Vice President of the
Company since the Merger; Vice President
of Pennsylvania Pittway from 1977 to the
Merger
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NOMINEE SINCE AGE AND DIRECTORSHIPS
- -------------------------------------------- -------- --- --------------------------------------------
<S> <C> <C> <C>
Leo A. Guthart(E)........................... 1980 57 Chairman and Chief Executive Officer of
Ademco Security Group (division of
Pennsylvania Pittway until the Merger,
division of the Company since the Merger);
Vice Chairman of the Board of the Company
since the Merger and of Pennsylvania
Pittway from 1984 to the Merger; Vice
President of Pennsylvania Pittway from
1970 to 1984; Director, AptarGroup, Inc.
(specialty packaging components
manufacturer); Trustee, Acorn Investment
Trust (mutual funds)
Irving B. Harris(E)+........................ 1953 84 Chairman of the Executive Committee of the
Company since the Merger; President of the
Company from 1964 to the Merger; Chairman
of the Executive Committee of Pennsylvania
Pittway from 1984 to the Merger; Chairman
of the Board of Pennsylvania Pittway from
1962 to 1984; Chairman of the Board of
Acorn Investment Trust (mutual funds);
Director, Teva Pharmaceutical Industries
Ltd. (pharmaceutical manufacturer)
King Harris(E)(N)+.......................... 1975 51 President and Chief Executive Officer of the
Company since the Merger; President of
Pennsylvania Pittway from 1984 to the
Merger; Vice President of Pennsylvania
Pittway from 1978 to 1984; Director,
AptarGroup, Inc. (specialty packaging
components manufacturer)
Neison Harris(E)+........................... 1963 80 Chairman of the Board of the Company since
1974; Chairman of the Board of
Pennsylvania Pittway from 1984 to the
Merger; President of Pennsylvania Pittway
from 1966 to 1984
William W. Harris(C)(E)(N)+................. 1975 55 Private Investor; Treasurer of KidsPac
(political action committee) since prior to
1990; Director, AptarGroup, Inc.
(specialty packaging components
manufacturer)
Jerome Kahn, Jr.(C)......................... 1994 60 Vice President of William Harris Investors,
Inc. (investment advisor) since prior to
1990; Trustee, Acorn Investment Trust
(mutual funds)
</TABLE>
- ------------
(A) Member of Audit Committee
(C) Member of Compensation Committee
(E) Member of Executive Committee
(N) Member of Nominating Committee
* Director of Pennsylvania Pittway prior to the Merger
+ Irving B. Harris and Neison Harris are brothers and Sidney Barrows is their
brother-in-law. William W. Harris is the son of Irving B. Harris and King
Harris is the son of Neison Harris.
7
<PAGE> 10
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met seven times during 1994.
The Company's Board of Directors has an Audit Committee, a Compensation
Committee and, since late 1994, a Nominating Committee.
The Audit Committee reviews and, as it deems appropriate, approves internal
accounting and financial controls for the Company and accounting principles and
auditing practices and procedures to be employed in preparation and review of
financial statements of the Company. The Audit Committee also makes
recommendations to the full Board concerning the engagement of independent
public accountants to audit the annual financial statements of the Company and
its subsidiaries and arranges with such accountants the scope of the audit to be
undertaken by such accountants. The current members of the Audit Committee are
Eugene L. Barnett (Chairman), E. David Coolidge III and Anthony Downs. During
1994, the Committee met twice.
The Compensation Committee reviews and determines the compensation of executive
officers, reviews and makes recommendations to the full Board with respect to
salaries, bonuses and deferred compensation of other officers and executives,
compensation of directors and management succession, and makes such
determinations and performs such other duties as are expressly delegated to it
pursuant to the terms of any employee benefit plan of the Company. The
Compensation Committee administers the Company's 1990 Stock Awards Plan. The
current members of the Compensation Committee are Anthony Downs (Chairman),
William W. Harris and Jerome Kahn, Jr. During 1994, the Compensation Committee
met five times.
The Nominating Committee, as it deems appropriate, makes recommendations to the
full Board with respect to the size and composition of the Board and its
committees and with respect to nominees for election as directors. The current
members of the Nominating Committee are William W. Harris (Chairman), E. David
Coolidge III and King Harris. Given the timing of its formation, the Nominating
Committee did not meet during 1994 nor did it recommend to the full Board any
nominees for election as directors at the 1995 annual meeting of stockholders.
The Nominating Committee will consider suggestions regarding candidates for
election to the Board submitted by stockholders in writing to the Secretary of
the Company. With regard to the 1996 annual meeting of stockholders, any such
suggestion must be received by the Secretary no later than the date by which
stockholder proposals for such annual meeting must be received as described
below under the heading "Stockholder Proposals for the 1996 Annual Meeting."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994, Neison Harris, Irving B. Harris and James H. Lorie were the members
of the Compensation Committee through the annual meeting of stockholders and
Anthony Downs, Jerome Kahn, Jr. and William W. Harris were the members
thereafter.
Neison Harris and Irving B. Harris were, respectively, the Chairman of the Board
and the Chairman of the Executive Committee of the Company during 1994.
Pulbrook Associates ("Pulbrook"), a limited partnership of which Irving B.
Harris owns 58.7% as a limited partner and a corporation owned by a trust of
which William W. Harris is a trustee owns 1.3% as the general partner, was
indebted to the Company during 1994 pursuant to an amortizing 8% mortgage note
in the original principal amount of $193,000 delivered in November 1993 in
connection with Pulbrook's purchase of a National Pride car care center from the
Company. The largest outstanding note balance during 1994 (on January 1, 1994)
was $193,000. The balance as of April 7, 1995 is $187,844.
8
<PAGE> 11
EXECUTIVE OFFICERS
All officers of the Company are elected each year by the Board of Directors at
its annual organization meeting in May. In addition to Sidney Barrows, Fred
Conforti, Leo A. Guthart, Irving B. Harris, King Harris and Neison Harris,
information with respect to whom is set forth above, the executive officers of
the Company include the following.
Nicholas J. Caccamo, 50, Secretary of the Company since 1987, Controller
since the Merger, Secretary of Pennsylvania Pittway from 1980 to the
Merger, Controller of Pennsylvania Pittway from 1977 to the Merger.
Paul R. Gauvreau, 55, Financial Vice President and Treasurer of the Company
since the merger, Financial Vice President of Pennsylvania Pittway from
1979 to the Merger, Treasurer of Pennsylvania Pittway from 1972 to the
Merger.
Sal F. Marino, 75, Chairman since 1990 and Chief Executive Officer since
1988 of Penton Publishing, Inc. (subsidiary of the Company), Vice President
of the Company since the Merger, Vice President of Pennsylvania Pittway
from 1976 to the Merger.
Daniel J. Ramella, 43, President and Chief Operating Officer since 1990,
Senior Vice President Publishing from 1989 to 1990, and Magazine Publisher
prior thereto, of Penton Publishing, Inc. (subsidiary of the Company), Vice
President of the Company since 1991.
Edward J. Schwartz, 53, Vice President of the Company since the Merger,
Vice President-Finance of the Company from 1979 to the Merger, Vice
President of Pennsylvania Pittway from 1987 to the Merger.
COMPENSATION
BOARD COMPENSATION
Compensation to non-officer directors is paid at the rate of $2,500 per quarter
plus $2,500 for each Board meeting attended in person, $1,000 for each Board
meeting attended by telephone and $1,000 for each committee meeting attended,
except that $250 is paid for attending a committee meeting held on the same day
as a Board meeting. Officer directors are not separately compensated for serving
as directors.
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the President and
Chief Executive Officer of the Company (who served as such throughout 1994) and
for each of the Company's four most highly compensated other executive officers
serving at the end of 1994. No other person who served as an executive
9
<PAGE> 12
officer of the Company at any time during 1994 had 1994 compensation in excess
of the 1994 compensation of any of the executive officers named in the table.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
---------------------- ------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING
AWARDS OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS ($)(1) SARS(#)(2) COMPENSATION
- ----------------------------------------------- ---- -------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
King Harris, President and Chief Executive 1994 $500,000 $ 200,000 24,575 $ 5,256(5)
Officer 1993 500,000 300,000 19,512 5,133
1992 450,000 450,000(3) 3,268
Fred Conforti, President of Pittway Systems 1994 360,000 $100,014 19,597 5,256(5)
Technology Group 1993 340,000 220,003 13,268 5,133
(division of the Company) 1992 325,000 2,675,000(4) 5,014
Leo A. Guthart, Chairman and Chief Executive 1994 355,000 300,000 12,878 4,779(6)
Officer of Ademco Security Group 1993 330,000 220,000 12,878 3,757
(division of the Company) 1992 321,732 135,000 3,778
Sal F. Marino, Chairman and Chief Executive 1994 315,000 7,215 98,402(7)
Officer of Penton Publishing, Inc. 1993 305,000 95,000 76,361
(subsidiary of the Company) 1992 300,000 90,000 70,233
Daniel J. Ramella, President and Chief 1994 285,000 115,000 100,014 2,768(8)
Operating Officer of Penton Publishing, Inc. 1993 275,000 75,000 10,732 2,435
(subsidiary of the Company) 1992 225,000 75,000 2,382
</TABLE>
- ------------
(1) The awards shown remained outstanding in full at the end of 1994, and were
the only outstanding restricted stock awards then held by named executive
officers. The aggregate value of the 12,367 shares of Class A Stock subject
to such awards was then $497,772. Each such award was a Performance Shares
Award scheduled to vest in equal pro rata installments over the five years
(or, in the case of Mr. Conforti's 1993 award, three years) subsequent to
its grant. Under the terms of each award, no shares are distributable until
vesting of such award in full or earlier termination of employment, and at
the time shares are distributed an amount is payable equal to the normal
quarterly dividends which would have been paid on such shares had such
shares been issued on the date such award was granted.
(2) Includes certain SARs awarded for 1994 in 1995 (and thus not shown under
"Option/SAR Grants During Year" or "Year-End Option/SAR Values"), as
follows: K. Harris, 5,063; F. Conforti, 6,329; and S. Marino, 7,215. Each
such SAR was a Bonus Award scheduled to vest in full six months subsequent
to its grant. Under the terms of each such SAR, following a date
approximately three years after the date of grant (or after the date of any
earlier termination of employment), an amount is payable equal to the fair
market value of the vested shares on such date plus the normal quarterly
dividends which would have been paid on such shares had such shares been
issued on the date such SAR was granted. The Compensation Committee may, in
its sole discretion, determine to pay the fair market value of the vested
shares in shares of Class A Stock rather than in cash.
(3) This larger than normal amount was based on the significant increase in the
Company's earnings of continuing operations and total earnings for 1992,
which included a substantial gain on the sale of businesses during the
Company's restructuring that began in 1992.
(4) Includes a special one-time bonus of $2,500,000 paid at the time of the sale
of the First Alert/BRK Electronics divisions for the instrumental role that
Mr. Conforti played in the growth of those businesses and because the sale
resulted in a substantial gain to the Company.
(5) Consists of $4,620 annual matching Company contributions during the year to
the Company's salary reduction plan and $636 for term life insurance
provided by the Company during the year.
(6) Consists of $4,620 annual matching Company contributions during the year to
the Company's salary reduction plan and $159 for term life insurance
provided by the Company during the year.
(7) Consists of $2,113 annual matching Company contributions during the year to
the Company's salary reduction plan and $96,289 required minimum
distributions paid during the year from the Company's salary reduction plan
and a Company retirement plan.
(8) Consists of $2,132 annual matching Company contributions during the year to
the Company's salary reduction plan and $636 for term life insurance
provided by the Company during the year.
10
<PAGE> 13
OPTION/SAR GRANTS DURING YEAR
The following table sets forth information with respect to options and stock
appreciation rights ("SARs") granted during 1994 to executive officers named in
the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS(1) VALUE AT ASSUMED
-------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) DATE 5%($) 10%($)
- ------------------------ ------------ ------------ ---------------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
King Harris 19,512 13.2 34.50 3/16/04 423,410 1,073,023
Fred Conforti 13,268 9.0 34.50 3/16/04 287,915 729,647
Leo A. Guthart 12,878 8.7 34.50 3/16/04 279,452 708,200
Sal F. Marino None
Daniel J. Ramella None
</TABLE>
- ------------
(1) Each grant was of a non-qualified option to purchase Class A Stock under the
Company's 1990 Stock Awards Plan at an exercise price equal to the market
price on the date of grant. Each option becomes exercisable on the third
anniversary of the date of grant, subject to acceleration in the event of
earlier termination of employment (full acceleration if earlier termination
is on account of death, permanent disability or retirement upon or after
reaching age sixty-five; partial acceleration in increments of 33 1/3% each
year commencing one year after the date of grant if termination is for any
other reason other than for "cause").
(2) The assumed annual rates of appreciation in the price of Class A Stock are
in accordance with rules of the Securities and Exchange Commission and are
not predictions of future market prices of the Class A Stock nor of the
actual values the named executive officers will realize. In order for such
annual rates of appreciation to be realized over the 10-year term of the
options, the market price of Class A Stock would have to increase to
$56.20/share (5%) or $89.49/share (10%). In such event, and assuming
corresponding annual rates of increase for the market price of Common
Stock, the market value of all currently outstanding shares of Common Stock
and Class A Stock would have increased by approximately $305,000,000 (5%)
or $773,000,000 (10%).
11
<PAGE> 14
YEAR-END OPTION/SAR VALUES
The following table sets forth information with respect to the value of
unexercised options and SARs held by executive officers named in the Summary
Compensation Table as of December 31, 1994.
YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/
YEAR-END(#) SARS AT YEAR-END($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------------- ------------------------- -------------------------
<S> <C> <C>
King Harris 0/68,339 $0/$1,179,766
Fred Conforti 0/26,536 0/ 270,336
Leo A. Guthart 0/25,756 0/ 262,389
Sal F. Marino None
Daniel J. Ramella 0/34,512 0/ 888,626
</TABLE>
EMPLOYMENT AGREEMENTS
The Company's employment agreement with Mr. Guthart provides for a minimum
annual salary of $355,000.
The employment agreement between a subsidiary of the Company and Sal F. Marino,
which provided for a minimum annual salary of $315,000 during 1994, plus payment
to him or his estate of $500,000 over a period of 60 months after termination of
employment (or a present value equivalent thereof at the time of termination),
was extended and amended during 1994 to provide for a minimum annual salary of
$330,000 after December 31, 1994 during the term of employment (i.e., until
December 31, 1995 or such later date as the Company and he may agree upon).
PLANS AND ARRANGEMENTS
In the descriptions of plans and arrangements which follow, references are made
to shares of Class A Stock. If the Change of Control Date (as defined in the
Company's Restated Certificate of Incorporation, as amended) should occur, the
Class A Stock will change into Common Stock on a share-for-share basis. In the
event of any such change, references to Class A Stock in such descriptions
should be understood to refer to Common Stock.
Salary Reduction Plan
Under the Company's salary reduction plan (which was originated by
Pennsylvania Pittway and assumed by the Company in connection with the Merger),
eligible covered employees of the Company and its subsidiaries may elect to have
a portion of their "earnings" (total cash compensation less certain items)
contributed to the plan by their employers, and their employers match such
contributions with specified percentages thereof. The percentages vary as
between separate groups of covered employees and are determined from time to
time by their employers. For 1994, such percentages ranged from .6% to 3.0% of
eligible covered employees' "earnings." Contributions and matches are invested
in one or more investment funds selected by the employees from among those
available under the plan. Such funds include a fund which invests solely in
Class A Stock. Salary reduction contributions vest immediately. Subject to
acceleration in the event of termination of employment upon retirement after age
65 or on account of death or disability, employer matching contributions vest on
a cumulative basis of 20% per year of credited service under the plan. Vested
12
<PAGE> 15
contributions (after any earnings or losses from the investment thereof) are
distributed in a lump sum or installments following termination of employment,
but account balances may under certain circumstances and subject to certain
conditions be withdrawn or borrowed earlier.
Retirement Plans
The Company and its subsidiaries have tax-qualified retirement plans
covering all domestic salaried employees, and certain domestic hourly employees,
after three months of service. The plans are fully paid for by the Company, and
employees become fully vested after five years of service. The annual benefit
payable to an employee under the plans upon retirement, computed as a straight
life annuity amount, equals the sum of the separate amounts the employee accrues
for each of his years of service under the plans plus certain increases put into
effect prior to 1995. Such separate amounts are determined as follows: for each
year through 1988, 1.2% of such year's compensation up to the Social Security
wage base for such year and 1.8% (2.0% for years after 1986) of such year's
compensation above such wage base; for each year after 1988 through the year in
which the employee reaches thirty-five years of service, 1.2% of such year's
"covered compensation" and 1.85% of such year's compensation above such "covered
compensation"; and for each year thereafter, 1.2% of such year's compensation.
The employee's compensation under the plans for any year includes all salary
(before any election under the Company's salary reduction plan), commissions and
overtime pay and, beginning in 1989, bonuses (in the case of each executive
officer named in the Summary Compensation Table, the equivalent of the sum of
the amounts set forth for such executive officer for such year in the Annual
Compensation columns of such Table and the amount of cash and/or the value of
any shares of Class A Stock distributed to such executive officer during such
year pursuant to awards under the Company's 1990 Stock Awards Plan); subject to
such year's limit applicable to tax-qualified retirement plans ($150,000 for
1994 and, currently, for each year thereafter). The employee's "covered
compensation" under the plans for any year is generally the average, computed
such year, of the Social Security wage bases for each of the thirty-five years
preceding the employee's Social Security retirement age, assuming that such
year's Social Security wage base will not change in the future. Normal
retirement age under the plans is age 65, and reduced benefits are available as
early as age 55. Benefits are not subject to reduction for Social Security
benefits or other offset amounts. Estimated annual benefits payable under the
plans upon retirement at normal retirement age for the following persons
(assuming 1995 and future compensation at the $150,000 limit currently
applicable and that covered compensation remains constant) are: K. Harris,
$116,604; F. Conforti, $104,844; L. Guthart, $126,684; and D. Ramella, $82,008.
S. Marino has reached normal retirement age, but has continued as an active
employee. The annual pension which would have been payable if he had retired on
December 31, 1994 is $86,328.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") makes
salary, bonus and long-term incentive plan decisions with respect to all of the
Company's executive officers.
In making such decisions, a primary goal, subject to the Company's performance
being adequate to support it, is that the compensation paid to the Company's
executive officers remain competitive. While the Committee is mindful of Section
162(m) of the Internal Revenue Code of 1986, as amended, and the loss of
deductibility for federal income tax purposes of certain remuneration of a
covered executive officer in excess of $1,000,000 during 1994 or any subsequent
year, the Committee does not base decisions primarily on preserving such
deductibility.
13
<PAGE> 16
The Committee's policies applicable to compensation of the Company's executive
officers other than its chief executive officer for 1994 were as follows:
SALARY
The Committee obtained from an outside compensation specialist a detailed report
regarding salaries being paid to top level executives in companies of roughly
the same size and in the same type of business as that of the Company executive.
In the case of Mr. Conforti and Mr. Guthart, salary information from companies
in the electronic/electrical equipment field was used to generate comparative
information. In the case of Mr. Marino and Mr. Ramella, companies in the trade
publishing industry were used as sources of data. In the case of Corporate
Office executives, salary information from both electronic/electrical equipment
companies and durable goods manufacturers was used.
The companies included in the report were not identified by the outside
compensation specialist, so the Committee was unable to determine whether the
performance of those companies (or at least of those companies which are
free-standing companies) was reflected in the indices used in the Performance
Graph which follows this Report. However, because nearly all of the Company's
major direct competitors are either divisions of larger diversified companies or
privately held, the Committee believes that those competitors generally are not
included in either the outside compensation specialist's report or such indices.
The Committee believes that the electronic/electrical equipment companies
included in the outside compensation specialist's report are, as a group, as
comparable to the companies included in the Value Line Electronics Industry
Index used in the Performance Graph as any other group of companies for which
compensation information was available to the Committee.
The report specifically identified salaries at the 50th, 75th and 90th
percentiles of the ranges of salaries surveyed. It also showed pay differentials
between presidents and chief executive officers (CEOs) of free-standing
companies and presidents and CEOs of division-based companies. The Committee
tended to focus on salaries paid in free-standing companies for two reasons.
First, Company businesses are given a high degree of autonomy and effectively
run as free-standing companies. Second, Company executives are likely targets of
management recruiters from free-standing competitors of the Company.
The Committee also reviewed published compensation information from three
publicly held companies in the alarm equipment business. While these companies
are smaller than the Company's major alarm divisions, they still are indicative
of what competitive firms are paying in the alarm industry. Similar information
regarding compensation in the trade publishing industry was not readily
available.
As for salary policy in general, the Committee aimed at setting salaries
somewhere between the 50th and 75th percentile of the salary ranges reported by
the outside compensation specialist.
BONUS
The Committee used the same outside compensation specialist to determine the
ranges of total cash compensation (i.e., salaries plus bonuses) being offered by
"comparable" companies in the electronic/electrical equipment, trade publishing,
and durable goods manufacturing industries. As was the case with salary
information supplied by the specialist, the Committee focused on total cash
compensation being given in the 50th to 75th percentile range because it felt
that this range was appropriate for an executive doing a good job in a business
performing well. Using the ranges as a guide, the Committee awarded bonuses
14
<PAGE> 17
which were related to general management performance and, in the case of
executives other than Corporate Office executives, the following criteria with
regard to their respective businesses:
1. The accomplishment of yearly goals and objectives.
2. Growth in pre-tax profit.
3. The overall level of pre-tax profit compared to other Company
businesses.
4. Return on equity.
For 1994, bonuses for executive officers ranged from 27% to 97% of their base
salaries and total cash compensation ranged between the 58th and 92nd percentile
of the ranges for free-standing companies reported by the outside compensation
specialist.
No set formula was used to determine total cash compensation because the
Committee believes that annual formulas are too rigid and lead to pay
distortions on a year-to-year basis. In the case of executives other than
Corporate Office executives, the Committee gave the greatest weight, however, to
growth in pre-tax profit and return on equity. Each of such executives
accomplished the goals set for him as to those criteria. In determining the
amounts of total cash compensation for Messrs. Guthart, Marino and Ramella, the
Committee also considered the amounts to which they became entitled in the first
quarter of 1995 under incentive plans established in 1992 based on the
improvement of profitability and return on equity between 1992 and 1994 for
their respective businesses.
The restricted stock awards (Performance Shares Awards) and certain SARs (Bonus
Awards) for 1994 shown in the Summary Compensation Table, as well as Bonus
Awards for 1994 made to two other executive officers, were made in lieu of
portions of bonuses which would otherwise have been paid in cash.
STOCK OPTION AND STOCK APPRECIATION RIGHT (SAR) PROGRAM
In 1993, the Committee established a ten-year Stock Option and Stock
Appreciation Right (SAR) Program to more closely tie the financial interests of
managers with those of stockholders. In 1994, 90,184 stock options and 57,500
SARs were granted to 47 top and middle managers, including three executive
officers named in the Summary Compensation Table. The exercise price of the
options and the base price for the SARs was the market price of the Company's
Class A Stock on the date of the grant.
The Program was designed by the Company's outside compensation specialist, who
patterned it after programs used by many other companies of the Company's size.
The Committee intends, subject to continuing improvement in the Company's
profits, that over the ten-year period stock options and SARs equivalent to
approximately 10% of the Company's outstanding shares will be awarded. According
to the outside compensation specialist, the 10% target represents the median for
companies of the Company's size.
The combined total of stock options and SARs granted under the Program through
1994 -- 355,132 -- represents approximately 2.5% of the Company's outstanding
Common and Class A Stock. The Committee intended that the initial option and SAR
grants in 1993 be somewhat larger than normal as a way of giving added incentive
to the executives participating.
The specific stock option and SAR grants given in 1994 were allocated among
executives on the basis of their positions and levels of responsibility. The
numbers and values of options and SARs already held by the executives were not a
factor in the allocation.
The Bonus Awards for 1994, SARs which were awarded in lieu of portions of
bonuses which would otherwise have been paid in cash, were not part of the
Program.
15
<PAGE> 18
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee obtained from an outside compensation specialist a detailed report
regarding compensation being paid to Presidents and CEOs of a broad range of
electronic/electrical equipment and durable goods manufacturers of roughly the
same size as the Company. The report specifically identified in dollar terms the
50th, 75th and 90th percentile of base salary, total cash compensation (base
salary plus cash bonus) and total compensation (including stock options and
other considerations) being paid to these comparable Presidents and CEOs. Mr.
Harris's base salary, total cash compensation, and total compensation, were
respectively, at the 60th, 80th and 77th percentiles of compensation reported.
The Committee felt compensation was appropriate given Pittway's outstanding
growth in earnings and return on equity during the year.
Compensation Committee
Anthony Downs, Chairman
William W. Harris
Jerome Kahn, Jr.
16
<PAGE> 19
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in cumulative
total shareholder return, assuming reinvestment of dividends into additional
shares of the stock on which paid, for the Company's Common Stock and Class A
Stock with a broad stock market index (Wilshire 5000 Index), an industry index
(Value Line Electronics Industry Index), and, through 1992, an industry index
previously used in the Company's proxy statements (Value Line Diversified
Industry Index). The Company believes that the Value Line Electronics Industry
Index represents a better comparison for periods since the spinoff of
AptarGroup, Inc. on April 22, 1993 (the "Spinoff"), because the majority of the
Company's sales, earnings and assets since the Spinoff have come from the
electronics-related Alarms and Other Security Products segment of its business.
Comparison of Five Year Cumulative Total Return
Pittway Corporation Common Stock and Class A Stock, Wilshire 5000 Index,
Value Line Electronics Industry Index and (through 1992) Value Line Diversified
Industry Index
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Pittway Common 100.00 53.66 78.75 91.88 169.54 196.61
Pittway Class A 100.00 50.04 88.18 107.24 210.66 266.58
VL Electronics Group 100.00 91.35 128.85 143.27 185.58 207.79
Wilshire 5000 100.00 93.82 125.91 137.20 152.69 152.60
VL Diversified Group 100.00 80.99 107.44 126.45
- ------------
</TABLE>
* For periods subsequent to the Spinoff, (A) total return on the Common Stock
was computed assuming that the share of AptarGroup, Inc. common stock
distributed for each share of Common Stock was reinvested in Common Stock on
that date, and (B) total return on Class A Stock was computed assuming that
the share of AptarGroup, Inc. common stock distributed for each share of Class
A Stock was reinvested in Class A Stock on that date.
17
<PAGE> 20
CERTAIN TRANSACTIONS
During 1994, a limited partnership in which Irving B. Harris and William W.
Harris have interests was indebted to the Company. See "Compensation Committee
Interlocks and Insider Participation."
SECTION 16(A) REPORTS
Based solely on a review of reports of ownership, reports of changes of
ownership and written representations under Section 16(a) of the Securities
Exchange Act of 1934 which were furnished to the Company with respect to 1994 by
persons who were, at any time during 1994, directors or officers of the Company
or beneficial owners of more than 10% of the outstanding shares of Common Stock
or Class A Stock, no such persons failed to file on a timely basis reports
required by such Section during 1994.
ANNUAL REPORT
The Company's annual report for the year ended December 31, 1994 has been mailed
separately to stockholders prior to the mailing of this proxy statement.
Stockholders are referred to the report for financial and other information
about the Company, but such report is not incorporated in this proxy statement
and is not to be deemed a part of the proxy soliciting material.
STOCKHOLDER PROPOSALS FOR THE 1996 ANNUAL MEETING
Any stockholder proposal to be considered for inclusion in proxy material for
the Company's annual meeting of stockholders in May 1996 must be received at the
principal executive offices of the Company no later than December 8, 1995.
PROXY SOLICITATION
Proxies will be solicited by mail. Proxies may also be solicited by directors,
officers and a small number of regular employees of the Company personally or by
mail, telephone or telegraph, but such persons will not be specially compensated
for such services. Brokerage houses, custodians, nominees and fiduciaries will
be requested to forward the soliciting material to the beneficial owners of
stock held of record by such persons, and the Company will reimburse them for
their expenses in doing so.
The entire cost of solicitation will be borne by the Company.
OTHER MATTERS
Price Waterhouse, who served as auditors for the year ended December 31, 1994,
have been selected by the Board, upon recommendation of the Audit Committee, to
audit the consolidated financial statements of the Company for the year ending
December 31, 1995. It is expected that a representative of Price Waterhouse will
attend the annual meeting, with the opportunity to make a statement if he should
so desire, and will be available to respond to appropriate questions.
The management does not intend to present, and does not have any reason to
believe that others will present, any item of business at the annual meeting
other than those specifically set forth in the notice of the meeting.
18
<PAGE> 21
However, if other matters are properly presented for a vote, the proxies will be
voted for such matters in accordance with the judgment of the persons acting
under the proxies.
By Order of the Board of Directors
NICHOLAS J. CACCAMO
Secretary
Chicago, Illinois
April 7, 1995
19
<PAGE> 22
<TABLE>
<S> <C> <C>
PITTWAY CORPORATION COMMON PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
200 S. Wacker Drive STOCK Neison Harris, King Harris and Nicholas J. Caccamo
Chicago, IL 60606-5802 PROXY (each with full power of substitution) are hereby
- ------------------------- authorized to vote all the shares of Common Stock
which the undersigned would be entitled to vote if
personally present at the annual meeting of
stockholders of Pittway Corporation to be held on May
11, 1995, and at any adjournment thereof as follows:
1. ELECTION OF DIRECTORS FOR all nominees listed WITHHOLD AUTHORITY / /
below / / to vote for all nominees listed
(except as noted to the contrary below
below)
</TABLE>
S. Barrows, F. Conforti, L. Guthart, I. Harris, K. Harris, N. Harris, W.
Harris and J. Kahn, Jr.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. In their discretion upon such other business as may properly be brought
before the meeting.
(continued on reverse side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS HEREIN DIRECTED,
BUT IF NO DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR THE ELECTION OF
DIRECTORS.
<TABLE>
<S> <C>
Dated ---------------------------- , 1995 ----------------------------------------
- ---- ---- ----------------------------------------
(Signature of Stockholder)
(Please fill in, sign and date this proxy
and mail it in the envelope provided.)
IMPORTANT: Please sign exactly as your
name or names appear on the left. Joint
owners should each sign personally. If
you sign as agent or in any other
representative capacity, please state the
capacity in which you sign.
</TABLE>
<PAGE> 23
<TABLE>
<S> <C> <C>
PITTWAY CORPORATION CLASS A PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
200 S. Wacker Drive STOCK Neison Harris, King Harris and Nicholas J. Caccamo
Chicago, IL 60606-5802 PROXY (each with full power of substitution) are hereby
- ------------------------- authorized to vote all the shares of Class A Stock
which the undersigned would be entitled to vote if
personally present at the annual meeting of
stockholders of Pittway Corporation to be held on May
11, 1995, and at any adjournment thereof as follows:
1. ELECTION OF DIRECTORS FOR all nominees listed WITHHOLD AUTHORITY / /
below / / to vote for all nominees listed
(except as noted to the contrary below
below)
</TABLE>
E. Barnett, E. Coolidge III and A. Downs
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. In their discretion upon such other business as may properly be brought
before the meeting.
(continued on reverse side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS HEREIN DIRECTED,
BUT IF NO DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR THE ELECTION OF
DIRECTORS.
<TABLE>
<S> <C>
Dated ---------------------------- , 1995 ----------------------------------------
- ---- ---- ----------------------------------------
(Signature of Stockholder)
(Please fill in, sign and date this proxy
and mail it in the envelope provided.)
IMPORTANT: Please sign exactly as your
name or names appear on the left. Joint
owners should each sign personally. If
you sign as agent or in any other
representative capacity, please state the
capacity in which you sign.
</TABLE>
<PAGE> 24
<TABLE>
<S> <C> <C>
PITTWAY CORPORATION CLASS A PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
200 S. Wacker Drive STOCK Neison Harris, King Harris and Nicholas J. Caccamo
Chicago, IL 60606-5802 PROXY (each with full power of substitution) are hereby
- ------------------------- authorized to vote all the shares of Class A Stock
which the undersigned would be entitled to vote if
personally present at the annual meeting of
stockholders of Pittway Corporation to be held on May
11, 1995, and at any adjournment thereof as follows:
1. ELECTION OF DIRECTORS FOR all nominees listed WITHHOLD AUTHORITY / /
below / / to vote for all nominees listed
(except as noted to the contrary below
below)
</TABLE>
E. Barnett, E. Coolidge III and A. Downs
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. In their discretion upon such other business as may properly be brought
before the meeting.
(continued on reverse side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS HEREIN DIRECTED,
BUT IF NO DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR THE ELECTION OF
DIRECTORS.
<TABLE>
<S> <C>
Dated ---------------------------- , 1995 ----------------------------------------
- ---- ---- ----------------------------------------
(Signature of Stockholder)
(Please fill in, sign and date this proxy
and mail it in the envelope provided.)
IMPORTANT: Please sign exactly as your
name or names appear on the left. Joint
owners should each sign personally. If
you sign as agent or in any other
representative capacity, please state the
capacity in which you sign.
</TABLE>
