<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):
/ / $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:
- --------------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/X/ 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: $125
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.: PRE 14A
- --------------------------------------------------------------------------------
(3) Filing party: Pittway Corporation
- --------------------------------------------------------------------------------
(4) Date filed: March 20, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
PITTWAY CORPORATION LOGO
200 South Wacker Drive
Chicago, Illinois 60606-5802
- ------------------------------------------
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD
ON MAY 9, 1996
- ------------------------------------------
TO THE STOCKHOLDERS:
The annual meeting of stockholders of Pittway Corporation will be held on
Thursday, May 9, 1996 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 act upon a proposal of the Board of Directors to amend the Company's
Restated Certificate of Incorporation, as amended, to increase the Company's
authorized Class A Stock from 24,000,000 to 36,000,000 shares and the
Company's authorized Common Stock from 30,000,000 shares to 42,000,000
shares.
3. To act upon a proposal of the Board of Directors to approve a 1996 Director
Stock Option Plan.
4. To act upon a proposal of the Board of Directors to approve the business
criteria for certain annual bonuses for the Company's chief executive
officer.
5. 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 29, 1996 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
JAMES F. VONDRAK
Secretary
Chicago, Illinois
April 4, 1996
<PAGE> 3
PITTWAY CORPORATION 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 9, 1996 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", will be voted FOR approval
of the amendment to the Company's Restated Certificate of Incorporation, as
amended, increasing the Company's authorized Class A Stock and Common Stock,
will be voted FOR approval of the Director Stock Option Plan, will be voted FOR
approval of the business criteria for certain annual bonuses for the Company's
chief executive officer 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
4, 1996. The mailing address of the principal executive offices of the Company
is 200 South Wacker Drive, Suite 700, Chicago, Illinois 60606-5802.
The Company, a Delaware corporation, 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 29, 1996, the record date for the annual
meeting, 3,938,832 shares of Common Stock and 16,973,313 shares of Class A
Stock. Both classes of stock are traded on the American Stock Exchange. Such
numbers of shares, and all other numbers of shares (except where the context
indicates otherwise) and exercise or base prices of options and SARs set forth
in this Proxy Statement, give effect to the three-for-two stock split of the
Common Stock and Class A Stock effected in the form of a 50% stock dividend paid
on March 1, 1996 to holders of record at the close of business on February 14,
1996.
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 2,244,165 votes (counting the Class A
1
<PAGE> 4
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 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 nine 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 the proposal of the Board of
Directors to amend the Company's Restated Certificate of Incorporation, as
amended, to increase the Company's authorized Class A Stock and Common Stock,
the proposal of the Board of Directors to approve a 1996 Director Stock Option
Plan, the proposal of the Board of Directors to approve the business criteria
for certain annual bonuses for the Company's chief executive officer and 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 considering the proposal of the Board of Directors to amend
the Company's Restated Certificate of Incorporation, as amended, to increase the
Company's authorized Class A Stock and Common Stock, the proposal of the Board
of Directors to approve a 1996 Director Stock Option Plan, the proposal of the
Board of Directors to approve the business criteria for certain annual bonuses
for the Company's chief executive officer and 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.
2
<PAGE> 5
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 29, 1996 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 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)... 1,225,880 31.1% 1,781,486 10.5% 24.9%
2 North LaSalle Street
Suite 400
Chicago, Illinois 60602
Mario J. Gabelli et al.(4)............. 729,300 18.5 3,834,130 22.6 19.7
One Corporate Center
Rye, New York 10580
Janus Capital Corporation(5)........... None -- 1,246,821 7.3 2.2
100 Fillmore Street, Suite 300
Denver, Colorado 80206
American National Bank and Trust
Company of Chicago(6)................ 340,560 8.6 552,120 3.3 7.0
33 North LaSalle Street
Chicago, Illinois 60590
Katherine Harris(3)(7)................. 425,738 10.8 615,033 3.6 8.6
Roberta Harris(3)(8)................... 200,700 5.1 226,590 1.3 4.0
Jack Polsky(3)(9)...................... 441,312 11.2 708,833 4.2 9.1
Boardman Lloyd(3)(8)................... 200,700 5.1 226,590 1.3 4.0
Irving B. Harris(3)(10)................ 1,225,880 31.1 1,781,486 10.5 24.9
King Harris(3)(11)(20)................. 549,909 14.0 916,043 5.4 11.4
Neison Harris(3)(12)................... 412,728 10.5 712,033 4.2 8.6
Sidney Barrows(3)(13).................. 38,541 1.0 62,821 .4 .8
William W. Harris(3)(14)............... 1,225,880 31.1 1,781,486 10.5 24.9
Eugene L. Barnett(15).................. 600 * 978 * *
Fred Conforti(16)(20).................. 3,900 .1 69,068 .4 .2
E. David Coolidge III.................. None -- 7,500 * *
Anthony Downs.......................... 1,650 * 7,189 * *
Leo A. Guthart(17)(20)................. None -- 89,428 .5 .2
Jerome Kahn, Jr.(3)(18)................ 1,226,150 31.1 1,781,925 10.5 24.9
Sal F. Marino(20)...................... None -- 50,023 .3 .1
Leo F. Mullin.......................... 750 * None -- *
Daniel J. Ramella(19).................. None -- 23,463 .1 *
All Directors and Executive Officers of
the Company as a group (18
persons)(20)(21)..................... 2,088,159 53.0 3,535,768 20.8 43.3
The Current Harris Group(3)............ 2,077,989 52.8 3,228,926 19.0 42.6
</TABLE>
- ------------
* Less than one-tenth of one percent
3
<PAGE> 6
(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 12, 1996, 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) The information as to the Current Harris Group (as defined below),
Katherine Harris, Roberta Harris, Jack Polsky, Boardman Lloyd, 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, Katherine Harris, Roberta Harris,
Jack Polsky, Boardman Lloyd, Irving B. Harris, King Harris, Neison Harris,
Sidney Barrows and William W. Harris and the shares referred to in note (6)
for the American National Bank and Trust Company of Chicago. 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 July 13,
1995 and March 6, 1996, 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
240,600 shares of Common Stock and 1,000,500 shares of Class A Stock)
except 62,700 shares of Common Stock and 332,264 shares of Class A Stock as
to which they have no voting power.
(5) The information as to Janus Capital Corporation ("Janus") is derived from a
statement dated February 13, 1996 filed with the Commission pursuant to
Section 13(g) of the Exchange Act. Such statement discloses that (i) Thomas
H. Bailey is President and Chairman of the Board of Janus, owns
approximately 12.2% of Janus and may be deemed to exercise control over
Janus, (ii) Janus is deemed to have beneficial ownership of all 1,246,821
shares, (iii) Janus and Mr. Bailey share voting and dispositive power with
respect to such shares, (iv) all such shares are held by managed portfolios
to which Janus is an investment advisor or sub-advisor and (v) Mr. Bailey
disclaims beneficial ownership of such shares.
4
<PAGE> 7
(6) The information as to American National Bank and Trust Company of Chicago
("ANB") is derived in part from a statement dated February 12, 1996 filed
with the Commission pursuant to Section 13(g) of the Exchange Act as to
Common Stock. ANB is the beneficial owner of 257,844 of such shares of
Common Stock and 331,308 of such shares of Class A Stock as co-trustee of
trusts created by Neison Harris and shares voting and dispositive power
with its co-trustees, King Harris and another member of the Current Harris
Group. ANB is a wholly-owned subsidiary of First Chicago NBD Corporation.
(7) Consists of shares held as co-trustee of trusts created by members of the
Current Harris Group. Ms. Harris shares with other members of the Current
Harris Group the power to vote and dispose of such shares.
(8) Consists of shares held by Ms. Harris and Mr. Lloyd as co-trustees of a
trust created by a member of the Current Harris Group. They share with
other members of the Current Harris Group the power to vote and dispose of
such shares.
(9) Includes 439,958 shares of Common Stock and 706,627 shares of Class A Stock
held as co-trustee of trusts created by members of the Current Harris
Group. Mr. Polsky shares with other members of the Current Harris Group the
power to vote and dispose of such shares.
(10) 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.
(11) King Harris shares the power to vote and dispose of 533,274 of such shares
of Common Stock and 850,780 of such shares of Class A Stock. Includes
15,375 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.
(12) Neison Harris shares the power to vote and dispose of 158,988 of such
shares of Common Stock and 314,961 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 45,750 shares of Common Stock and 58,050
shares of Class A Stock.
(13) Does not include 121,800 shares of Common Stock and 198,534 shares of Class
A Stock owned by Mr. Barrows' wife, as to which shares he disclaims
beneficial ownership. Includes 13,491 shares of Common Stock and 21,990
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 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.
(14) 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.
(15) Eugene Barnett shares power to vote and dispose of all such shares
(16) Does not include 9,000 shares of Class A Stock owned by Mr. Conforti's
wife, as to which shares he disclaims beneficial ownership. Includes 43,435
shares of Class A Stock as to which he shares voting and dispositive power.
(17) Includes 28,408 shares of Class A Stock as to which Mr. Guthart shares
voting and dispositive power.
(18) Includes the shares held by WHI, with respect to which Mr. Kahn acts as
portfolio manager, and 270 shares of Common Stock and 439 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.
(19) Mr. Ramella shares power to vote and dispose of 23,022 of such shares.
Includes 12,300 shares of Class A Stock which Mr. Ramella has the right to
acquire within 60 days through the exercise of options awarded under the
Company's 1990 Stock Awards Plan.
5
<PAGE> 8
(20) Includes shares of Class A Stock beneficially owned as of December 31, 1995
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).
(21) Includes 1,638,435 shares of Common Stock and 2,468,805 shares of Class A
Stock as to which voting power is shared other than with directors and
executive officers of the Company and 513,426 shares of Common Stock and
827,716 shares of Class A Stock as to which dispositive power is so shared.
Includes 30,750 shares of Class A Stock which executive 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
Twelve 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 nine 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 --
or, in the case of Leo F. Mullin, elected by directors who were 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.
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 68 Retired; Consultant (March 1991 to April
1993) to, Chairman and Chief Executive
Officer (1976 to 1991) of, The Brand
Companies, Inc. (specialty contractor);
Vice President of the Company (1979 to
1993); Director, AptarGroup, Inc.
(specialty packaging components
manufacturer) and National Service
Corporation (specialty contractor)
E. David Coolidge III(A)(N).................. 1994 52 Chief Executive Officer (since January 1996),
Managing Partner (1995), Manager, Corporate
Finance Department (1977 to 1995) of
William Blair & Company L.L.C. (investment
banker)
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NOMINEE SINCE AGE AND DIRECTORSHIPS
- --------------------------------------------- -------- --- ---------------------------------------------
<S> <C> <C> <C>
Anthony Downs(A)(C).......................... 1971 65 Senior Fellow (since prior to 1991) of
Brookings Institution (non-profit social
policy research center); 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 77 Of counsel (since January 1994) to,
shareholder (prior to 1994) 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
(1963 to the Merger); Treasurer of the
Company (1974 to the Merger)
Fred Conforti............................... The 54 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 (1977 to the
Merger)
Leo A. Guthart(E)........................... 1980 58 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 (1984 to the Merger); Director,
AptarGroup, Inc. (specialty packaging
components manufacturer) and Chairman of
the Board and Director, Cylink Corporation
(commercial data encryption/wireless
communication company); Trustee, Acorn
Investment Trust (mutual funds)
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NOMINEE SINCE AGE AND DIRECTORSHIPS
- -------------------------------------------- -------- --- --------------------------------------------
<S> <C> <C> <C>
Irving B. Harris(E)+........................ 1953 85 Chairman of the Executive Committee of the
Company (since the Merger); President of
the Company (1964 to the Merger); Chairman
of the Executive Committee of Pennsylvania
Pittway (1984 to the Merger); Chairman of
the Board of Acorn Investment Trust
(mutual funds); Director, Teva
Pharmaceutical Industries Ltd.
(pharmaceutical manufacturer)
King Harris(E)(N)+.......................... 1975 52 President and Chief Executive Officer of the
Company (since the Merger); President
(1984 to 1987), President and Chief
Executive Officer (1987 to the Merger) of
Pennsylvania Pittway; Chairman of the
Board and Director, AptarGroup, Inc.
(specialty packaging components
manufacturer) and Director, Cylink
Corporation (commercial data
encryption/wireless communication company)
Neison Harris(E)+........................... 1963 81 Chairman of the Board of the Company (since
1974); Chairman of the Board (1984 to the
Merger), President (1966 to 1984) of
Pennsylvania Pittway
William W. Harris(C)(E)(N)+................. 1975 56 Private Investor; Treasurer (since prior to
1991) of KidsPac (political action
committee); Director, AptarGroup, Inc.
(specialty packaging components
manufacturer) and Cylink Corporation
(commercial data encryption/wireless
communication company)
Jerome Kahn, Jr.(C)......................... 1994 61 Vice President (since prior to 1991) of
William Harris Investors, Inc. (investment
advisor); 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.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met six times during 1995.
The Company's Board of Directors has an Audit Committee, a Compensation
Committee, an Executive Committee and a Nominating Committee.
8
<PAGE> 11
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
1995, 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, Jerome Kahn, Jr. and Leo F. Mullin. During 1995, the
Compensation Committee met five times.
The Executive Committee generally meets prior to each regular meeting of the
Board of Directors to distill topics and issues to be presented at such
meetings. When the full board is not in session, the Executive Committee may
exercise all the powers and authority of the Board of Directors except as
limited by law. The current members of the Executive Committee are Irving B.
Harris (Chairman), Sidney Barrows, Leo A. Guthart, King Harris, Neison Harris
and William W. Harris. During 1995, the Executive Committee met eight 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. During 1995, the Nominating Committee met once.
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 1997 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 1997 Annual Meeting."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, Anthony Downs, William W. Harris and Jerome Kahn, Jr. were the
members of the Compensation Committee.
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 1995 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 1995 (on January 1, 1995)
was $188,433. The balance as of March 29, 1996 was $179,862.
9
<PAGE> 12
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:
Paul R. Gauvreau, 56, 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, 76, 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, 44, 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, 54, 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.
Philip V. McCanna, 49, Controller of the Company since 1995, Director of
Financial Reporting of the Company from 1989 to 1995, Controller of The
Brand Companies, Inc. (specialty contractor) from 1984 to 1989.
James F. Vondrak, 51, Secretary of the Company since 1995, Group Controller
of Pittway Systems Technology Group (division of the Company) since 1994,
Controller of System Sensor (division of the Company) from the Merger to
1994.
COMPENSATION
BOARD COMPENSATION
Compensation to non-officer directors is paid at the rate of $2,500 per quarter
plus $3,000 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. The Chairman of the Audit Committee is paid an additional
$2,000 per year. Officer directors are not separately compensated for serving as
directors.
Subject to approval of stockholders at the annual meeting, non-employee
directors will be awarded options under a 1996 Director Stock Option Plan. See
"Proposal To Approve the Pittway Corporation 1996 Director Stock Option Plan"
below.
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the President and
Chief Executive Officer of the Company (who served as such throughout 1995) and
for each of the Company's four most highly compensated other executive officers
serving at the end of 1995. No other person who served as an executive
10
<PAGE> 13
officer of the Company at any time during 1995 had 1995 compensation in excess
of the 1995 compensation of any of the executive officers named in the table.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS
------------------------- PAYOUTS
ANNUAL RESTRICTED SECURITIES -------
COMPENSATION STOCK UNDERLYING LTIP
------------------- AWARDS OPTIONS/ PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) ($)(1)(2) SARS(#)(1)(3) $(4) COMPENSATION
- ------------------------------------- ---- -------- -------- --------- ------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
King Harris, President and 1995 $525,000 40,050 $ 5,077(5)
Chief Executive Officer 1994 500,000 $200,000 36,862 5,256
1993 500,000 300,000 29,268 5,133
Fred Conforti, President of 1995 375,000 $125,000 25,950 5,077(5)
Pittway Systems Technology Group 1994 360,000 100,014 29,395 5,256
(division of the Company) 1993 340,000 220,003 19,902 5,133
Leo A. Guthart, Chairman and Chief 1995 375,000 350,000 19,500 $30,000 5,077(5)
Executive Officer of Ademco Security 1994 355,000 300,000 19,317 4,779
Group (division of the Company) 1993 330,000 220,000 19,317 3,757
Sal F. Marino, Chairman and Chief 1995 330,000 19,200 95,000 106,169(6)
Executive Officer of Penton 1994 315,000 10,822 98,402
Publishing,
Inc. (subsidiary of the Company) 1993 305,000 95,000 76,361
Daniel J. Ramella, President and 1995 300,000 115,000 100,000 10,500 75,000 3,534(7)
Chief
Operating Officer of Penton 1994 285,000 115,000 100,014 2,768
Publishing,
Inc. (subsidiary of the Company) 1993 275,000 75,000 16,098 2,435
</TABLE>
- ------------
(1) All of the restricted stock awards, and the following SARs awarded for 1995
and 1994, were awarded in lieu of bonuses or portions of bonuses that would
otherwise have been paid in cash: K. Harris, 10,800 and 7,594 shares,
respectively; F. Conforti, 6,000 and 9,493 shares, respectively; and S.
Marino, 7,200 and 10,822 shares, respectively.
(2) The restricted stock awards shown for 1995 were awarded in 1996 and thus
were not outstanding at the end of 1995. The other restricted stock awards
shown remained outstanding in full at the end of 1995 and were the only
outstanding restricted stock awards then held by named executive officers.
The aggregate value of the 18,550 shares of Class A Stock subject to such
awards was then $837,840. Each award shown 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.
(3) Includes certain SARs awarded for 1995 in 1996 (and thus not shown in the
following sections titled "Option/SAR Grants During Year" and "Year-End
Option/SAR Values"), as follows: K. Harris, 10,800 shares; F. Conforti,
6,000 shares; and S. Marino, 7,200 shares. Each such SAR was a Bonus Shares
Award vested in full upon grant. Under the terms of each such SAR, following
a date approximately three years after the date of grant (or following the
date of any earlier termination of employment), an amount is payable equal
to the fair market value of the 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 shares in shares of Class A Stock rather than in cash.
(4) Consists of amounts paid under incentive plans established in 1992 based on
the improvement of profitability and return on equity between 1992 and 1994
for their respective businesses.
(5) Consists of $4,500 annual matching Company contributions during the year to
the Company's salary reduction plan and $577 for term life insurance
provided by the Company during the year.
(6) Consists of $2,957 annual matching Company contributions during the year to
the Company's salary reduction plan, $58 for term life insurance provided by
the Company during the year and $103,154 required minimum distributions paid
during the year from the Company's salary reduction plan and a Company
retirement plan.
(7) Consists of $2,957 annual matching Company contributions during the year to
the Company's salary reduction plan and $577 for term life insurance
provided by the Company during the year.
11
<PAGE> 14
OPTION/SAR GRANTS DURING YEAR
The following table sets forth information with respect to options and stock
appreciation rights ("SARs") granted during 1995 to executive officers named in
the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(3)
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) DATE 5%($) 10%($)
- ------------------------ ------------ ------------ ---------------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
King Harris(1).......... 29,250 9.1 29.83 3/14/05 548,730 1,390,545
King Harris(2).......... 7,594 2.4 0 1/24/98 231,525 266,200
Fred Conforti(1)........ 19,950 6.2 29.83 3/14/05 374,262 948,423
Fred Conforti(2)........ 9,493 2.9 0 1/24/98 289,406 332,750
Leo A. Guthart(1)....... 19,500 6.0 29.83 3/14/05 365,820 927,030
Sal F. Marino(1)........ 12,000 3.7 29.83 3/14/05 225,120 570,480
Sal F. Marino(2)........ 10,822 3.4 0 1/24/98 329,923 379,335
Daniel J. Ramella(1).... 10,500 3.3 29.83 3/14/05 196,980 499,170
</TABLE>
- ------------
(1) Consists of non-qualified options to purchase Class A Stock granted under
the Company's 1990 Stock Awards Plan at exercise prices equal to the market
prices on the dates 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) Consists of SARs with respect to Class A Stock awarded under the Company's
1990 Stock Awards Plan (in lieu of bonuses or portions of bonuses that would
otherwise have been paid in cash) at reference prices of zero dollars and
fully vested at grant. Under the terms of each SAR, following a date
approximately three years after the date of grant (or following the date of
any earlier termination of employment), an amount is payable equal to the
fair market value of the 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 shares in
shares of Class A Stock rather than in cash.
(3) 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 3-year term of the
SARs, the market price of Class A Stock would have to remain at or above
$34.54/share (5%) or $39.71/share (10%) at the end of that term. 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
$48.60/share (5%) or $77.38/share (10%) during that term. In such events,
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 $87,000,000
(5%) or $182,000,000 (10%) during that 3-year term and by $392,000,000 (5%)
or $994,000,000 (10%) during that 10-year term.
12
<PAGE> 15
YEAR-END OPTION/SAR VALUES
The following table sets forth information with respect to the value of
unexercised options and SARs held by executive officers named in the Summary
Compensation Table as of December 31, 1995.
YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/
YEAR-END(#) SARS AT YEAR-END($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
--------------------------------------- ------------------------- -------------------------
<S> <C> <C>
King Harris............................ 43,972/87,786 $1,588,372/1,919,217
Fred Conforti.......................... 0/59,754 0/1,305,976
Leo A. Guthart......................... 0/58,134 0/1,266,430
Sal F. Marino.......................... 0/12,000 0/ 184,000
Daniel J. Ramella...................... 35,670/26,598 1,385,620/ 613,086
</TABLE>
EMPLOYMENT AGREEMENTS
The employment agreement between a subsidiary of the Company and Mr. Marino,
which provided for a minimum annual salary of $330,000 during 1995, 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 1995 to provide for a minimum annual salary of
$350,000 after December 31, 1995 during the remaining term of employment (i.e.,
until December 31, 1996 or such later date as the Company and he may agree
upon).
Employment agreements entered into effective as of January 1, 1996 between the
Company and K. Harris and L. Guthart provide for minimum annual salaries of
$550,000 and $425,000, respectively, supplementary insurance coverage (or its
cash equivalent) and participation in the Company's supplemental executive
retirement plan effective January 1, 1995. The agreements are for terms of three
years and five years, respectively. Each agreement renews automatically at the
end of each year for an additional year (or until age 65, if earlier) unless
either party thereto elects otherwise, but may be terminated by the executive
officer on 180 days' notice (with forfeiture of supplemental retirement
benefits). Each agreement includes non-competition, non-solicitation and
confidentiality obligations on the part of the executive officer which survive
its termination.
PLANS AND ARRANGEMENTS
In the descriptions of plans and arrangements which follow, and in the
descriptions elsewhere in this Proxy Statement of outstanding restricted stock
awards, options and SARs, 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.
13
<PAGE> 16
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 1995, 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
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 1996. 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 or cafeteria
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 and LTIP Payout columns of such Table and
the amount taxable to such executive officer during such year related to options
and SARs awarded pursuant to the Company's 1990 Stock Awards Plan); subject to
such year's limit applicable to tax-qualified retirement plans ($150,000 for
1995 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 1996 and future compensation at the $150,000 limit currently
applicable and that covered compensation remains constant; but without regard to
the formula limitation on annual benefits imposed on tax-qualified retirement
plans, currently $120,000) are: K. Harris, $117,778; F. Conforti, $105,301; L.
Guthart, $129,074; and D. Ramella, $84,832. 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, 1995 is $70,214.
14
<PAGE> 17
Supplemental Executive Retirement Plan
Two executive officers of the Company and four other employees of the Company or
a subsidiary participate in the Company's supplemental executive retirement
plan, which is not tax-qualified. The annual benefit payable to a participant
under the plan at age 65, computed as a straight life annuity amount, equals the
sum of the separate amounts the participant accrues for each of his years of
service during or after 1995. The separate amount for each such year is 1.85% of
that portion of the participant's salary and annual discretionary cash bonus, if
any, for such year (before any election under the Company's salary reduction
plan, and including any portion of such bonus taken in the form of Performance
Shares Awards) in excess of $150,000 (or any higher limit applicable that year
to tax-qualified retirement plans) but less than $300,000. Benefits are not
subject to reduction for Social Security benefits or other offset amounts.
Accrued benefits are subject to forfeiture in certain events. Estimated annual
benefits payable under the plan upon retirement at age 65 for the following
persons (assuming 1996 and future annual salary and discretionary cash bonus of
not less than $300,000 for each of them and that the $150,000 limit remains
constant) are: K. Harris, $47,392; and L. Guthart, $24,168.
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.
The Committee's policies applicable to compensation of the Company's executive
officers other than its chief executive officer for 1995 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 86
companies in the electronic/electrical equipment field was used to generate
comparative information. In the case of Mr. Marino and Mr. Ramella, 20 companies
in the 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.
Only one of the companies included in the report had its performance reflected
in the Value Line Electronics Industry Index used in the Performance Graph which
follows this Report. The Committee does not know whether any of the companies
included in the report had its performance reflected in the Wilshire 5000 Index
used in such Performance Graph. Because nearly all of the Company's major direct
competitors are either divisions of larger diversified companies or privately
held, 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 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-
15
<PAGE> 18
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 freestanding 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
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 1995, bonuses for executive officers ranged from 71.6% to 100% of their base
salaries and total cash compensation ranged between the 60th and 96th 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 believed that annual formulas, used alone, 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.
The restricted stock awards (Performance Shares Awards) and certain SARs (Bonus
Shares Awards) for 1995 shown in the Summary Compensation Table, as well as
Bonus Shares Awards for 1995 made to two other executive officers, were made in
lieu of bonuses or 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 1995, 166,650 stock options and 105,000
SARs were granted to 54 top and middle managers, including all five 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
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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
1995 -- 804,348 -- represents approximately 3.8% 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 1995 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 Shares Awards for 1995, SARs which were awarded in lieu of bonuses or
portions of bonuses which would otherwise have been paid in cash, were not part
of the Program.
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 50th, 73rd and 62nd percentiles of compensation reported.
The Committee felt such compensation was appropriate given Pittway's outstanding
growth in earnings and return on equity during the year.
EMPLOYMENT AGREEMENTS AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In 1995, the Committee approved the employment agreements with K. Harris and L.
Guthart described under "Compensation -- Employment Agreements" above, and the
participation of such executive officers in the supplemental executive
retirement plan described under "Compensation -- Supplemental Executive
Retirement Plan" above.
The Committee felt it appropriate to enter into (or, in the case of Mr. Guthart,
replace) formal contracts for employment with these executives and to offer them
participation in a supplemental retirement plan in order to encourage them to
continue their services and the long-term benefits provided under their
leadership of the Company.
Compensation Committee
Anthony Downs, Chairman
William W. Harris,
Jerome Kahn, Jr.
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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 spin off 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
[GRAPH]
* 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.
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PROPOSAL TO INCREASE THE COMPANY'S AUTHORIZED STOCK
On March 12, 1996, the Board of Directors adopted a resolution setting forth an
amendment to the Company's Restated Certificate of Incorporation, as amended,
that would increase the Company's authorized Class A Stock of the par value of
$1.00 per share from 24,000,000 shares to 36,000,000 shares and the Company's
authorized Common Stock of the par value of $1.00 per share from 30,000,000
shares to 42,000,000 shares, and directed that the proposed amendment be
submitted to a vote of the stockholders at the annual meeting. The amendment,
which is permitted by the Delaware General Corporation Law, is included in
Appendix A attached hereto.
At March 29, 1996, 16,973,313 shares of Class A Stock were issued and
outstanding and there were 1,610,282 shares of Class A Stock reserved for
issuance pursuant to the Company's 1990 Stock Awards Plan and salary reduction
plan; and 3,938,832 shares of Common Stock were outstanding and 18,583,595
shares of Common Stock were reserved for issuance in the event of a
share-for-share change of the outstanding and reserved Class A Stock into Common
Stock on the "Change of Control Date" (as defined in the Company's Restated
Certificate of Incorporation, as amended). At such date, 5,416,405 shares of
Class A Stock and 7,477,573 shares of Common Stock remained available for other
purposes.
The Company's authorized capital stock has not been changed in the six years
since the Merger. Immediately following the Merger, and after giving effect to
the initial reservations of shares for issuance pursuant to the Company's 1990
Stock Awards Plan and salary reduction plan (which were contemplated at the time
of the Merger), 11,157,526 shares of Class A Stock were issued and outstanding
and 907,346 shares of Class A Stock were reserved for issuance pursuant to
employee plans; and 2,626,024 shares of Common Stock were outstanding and
12,064,872 shares of Common Stock were reserved for issuance in the event of a
share-for-share change of the then outstanding and reserved Class A Stock into
Common Stock on the Change of Control Date. At such time, and after giving
effect to such initial reservations of shares, 11,935,128 shares of Class A
Stock and 15,309,104 shares of Common Stock remained available for other
purposes. Subsequent to the Merger, until the three-for-two stock split of the
Class A Stock and Common Stock effected in the form of a 50% stock dividend paid
on March 1, 1996, the only shares of Class A Stock issued were issued pursuant
to employee plans and no shares of Common Stock were issued. The three-for-two
stock split significantly reduced the number of shares of Class A Stock
available for purposes other than existing employee benefit plans and the number
of shares of Common Stock available for purposes other than issuance upon a
Change of Control Date. The Board of Directors believes that the numbers of
shares available for such purposes should be returned to levels approximating
(after adjustment for the stock split) those that existed following the Merger.
Except for outstanding awards under the Company's 1990 Stock Awards Plan, the
Company is not now a party to any plan, arrangement, agreement or understanding,
in writing or otherwise, which would require the issuance of any of its stock.
And although the Company has from time to time conducted negotiations concerning
possible acquisitions, using its stock, of companies within the industries in
which it does business, no such discussions are pending or currently foreseen.
The Board of Directors believes that the proposed increase in authorized shares
of Class A Stock and Common Stock will enhance the Company's flexibility in
connection with possible future actions such as stock dividends, stock splits,
corporate mergers, acquisitions of property, issuances of convertible debt or
equity securities, issuances of options, warrants and other awards under
employee plans, or other uses for corporate purposes.
Although the Board of Directors has no present intention of doing so, shares of
authorized and unissued Class A Stock and/or Common Stock and shares held in the
treasury, if any, could (within the limits imposed by applicable law and the
rules of the American Stock Exchange as and to the extent that such rules may be
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observed by the Company) be issued in one or more transactions which would make
a takeover of the Company more difficult and, therefore, less likely. Such
shares could also be used to dilute the stock ownership of persons seeking to
obtain control of the Company. Also, such shares could be privately placed with
purchasers who might side with the management of the Company in opposing a
hostile tender offer or other attempt to obtain control. Issuance of Class A
Stock and/or Common Stock as an antitakeover device might preclude stockholders
from taking advantage of a situation which might be favorable to their interest.
In addition, subject to the considerations referred to above as to applicable
law and rules of the American Stock Exchange, the Board of Directors could,
although it has no present intention of doing so, issue shares of Class A Stock
and/or Common Stock to a holder or holders who might thereby obtain sufficient
voting power to ensure that any proposal to effect certain transactions
involving the Company, to take certain stockholder action or to amend or repeal
certain of the provisions of the Company's Restated Certificate of
Incorporation, as amended, would not receive the two-thirds of votes which the
outstanding shares of Class A Stock and Common Stock are then entitled to cast
required therefor.
The Board of Directors will determine whether, when and on what terms the
issuance of additional shares may be warranted. However, the American Stock
Exchange has rules that limit the amount of additional shares which the Company
may issue without stockholder approval. Failure to observe the rules of the
American Stock Exchange could result in the delisting of the Company's
securities listed thereon. In the event of such delisting, the Company believes
that other markets having comparable depth and liquidity would be available.
If the proposed amendment is approved, any or all of the authorized shares of
Class A Stock and Common Stock could be issued without further action by the
Company's stockholders and without first offering such shares to stockholders
for subscription. The issuance of shares could have the effect of diluting the
earnings per share and book value per share of previously outstanding shares of
Company stock. The issuance of shares otherwise than on a pro rata basis to all
current Company stockholders would reduce the proportionate interests of the
current Company stockholders.
VOTE REQUIRED FOR APPROVAL
To satisfy the requirements of the General Corporation Law of the State of
Delaware and the American Stock Exchange, the vote required for the approval of
the amendment to the Company's Restated Certificate of Incorporation, as
amended, is the affirmative vote of a majority of each of (i) the votes which
the outstanding Common Stock and Class A Stock are entitled to cast at the
annual meeting, (ii) the outstanding Common Stock, voting as a class, and (iii)
the outstanding Class A Stock, voting as a class.
BOARD OF DIRECTORS' RECOMMENDATION
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS AN AFFIRMATIVE VOTE FOR THE
APPROVAL OF THE AMENDMENT.
PROPOSAL TO APPROVE THE PITTWAY CORPORATION 1996 DIRECTOR STOCK OPTION PLAN
On March 12, 1996, the Board of Directors adopted the Pittway Corporation 1996
Director Stock Option Plan (the "Plan") set forth as Appendix B hereto. Subject
to approval of the stockholders at the annual meeting, the Plan provides for the
automatic award of stock options to directors of the Company who are not
employees of the Company or any of its subsidiaries ("Non-Employee Directors").
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The purpose of the Plan is to promote the long-term financial interests of the
Company and its subsidiaries by (i) providing an incentive for Non-Employee
Directors to maximize the long-term value of the Class A Stock and otherwise act
in the best interest of the Company's stockholders, (ii) providing Non-Employee
Directors with the opportunity to acquire a greater stake in the future of the
Company and its stockholders through stock ownership and (iii) attracting and
retaining highly qualified Non-Employee Directors.
The Plan provides initially only for the issuance of Class A Stock. It
recognizes, however, that 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 such
event, the Plan provides that Common Stock is to be substituted for Class A
Stock, both in terms of the shares issuable and for purposes of outstanding
awards. References to Class A Stock in the summary which follows should be
understood to refer to Common Stock in the event of any such change.
The following is a brief summary of some of the terms of the Plan and is
qualified in its entirety by, and made subject to, the Plan set forth as
Appendix B hereto.
SUMMARY
Under the Plan, the aggregate number of shares subject to options cannot exceed
30,000 shares of Class A Stock. The market value of 30,000 shares of Class A
Stock on March 29, 1996 was $1,485,000.
In each of the years 1996 through 1999, on the third trading date following the
date of the annual meeting of stockholders, each Non-Employee Director who has
not theretofore been awarded an option under the Plan will be awarded an option
to purchase 4,000 shares if the award is made in 1996, 3,000 shares if the award
is made in 1997, 2,000 shares if the award is made in 1998, or 1,000 shares if
the award is made in 1999. Six of the nominees for election as directors at the
annual meeting are Non-Employee Directors. If all six are elected at the annual
meeting, on the third trading day thereafter they will be awarded options to
purchase an aggregate of 24,000 shares.
The option price per share under each option will be 100% of the market value of
the Class A Stock on its award date. Each option will be exercisable six months
after its award as to 1,000 shares; and on each anniversary date of its award,
provided the holder is then a member of the Board and not an employee of the
Company or any of its subsidiaries, will become exercisable as to an additional
1,000 shares until such option has become exercisable in full. The option price
may be paid in cash, using Class A Stock and/or Common Stock already owned by
the optionee (valued at its market value on the date of exercise), or a
combination thereof. Each option, to the extent then unexercised, will expire
ten years after its award date. In the event a Non-Employee Director ceases to
be a member of the Board for any reason (including, without limitation,
expiration of term without re-election, resignation, retirement, total
disability or death), each option previously granted to such Non-Employee
Director may be exercised only to the extent exercisable on the date of
termination and will cease to be exercisable on the fifth anniversary of the
date of termination or, if earlier, on the tenth anniversary of the award date.
For purposes of the Plan, the market value of the Class A Stock or Common Stock
on any date will be its closing price on that date (or, if that date is not a
trading date for such Stock, on the next preceding trading date for such Stock)
on the American Stock Exchange Composite Transactions list, as subsequently
reported in The Wall Street Journal.
Options will be non-qualified options for purposes of the Internal Revenue Code
of 1986, as amended (the "Code"); i.e., will not qualify as "incentive stock
options" under Code Section 422.
Options will not be transferable except by will or the laws of descent and
distribution, and during an optionee's lifetime will be exercisable only by the
optionee or his or her legal representative.
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The maximum number of shares subject to the Plan, the number of shares to be
subject to each option, the number of shares with respect to which options
become exercisable each year and the number of shares and option prices under
outstanding options are subject to adjustment in the event of certain "Organic
Changes" and/or to prevent dilution or enlargement of option rights.
The Plan may be amended by the Board at any time; provided that provisions of
the Plan of the kind described in Rule 16b3(c)(2)(ii)(A) promulgated under the
Securities Exchange Act of 1934 may not be amended more than once every six
months, other than to comport with changes in the Code, the Employee Retirement
Income Security Act, or the rules thereunder.
The Plan may be terminated by the Board at any time, but termination will not
adversely affect any outstanding option without the consent of its holder.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a brief summary of the federal
income tax consequences of the options to be awarded under the Plan. The laws
governing the tax aspects of non-qualified options are highly technical and such
laws are subject to change in the future. Such changes may or may not be
retroactive.
Options. The holder of an option will not recognize taxable income upon the
grant thereof, nor will the Company be entitled to a deduction in respect of
such grant. Upon the exercise of an option as to any shares, the excess of the
fair market value of such shares on the date of exercise over their option price
will constitute compensation taxable to the optionee as ordinary income.
Provided it complies with applicable tax reporting requirements, the Company
will generally be entitled to a deduction, in the year of exercise, in an amount
equal to such compensation taxable to the optionee as ordinary income.
Upon an optionee's sale of option shares, the difference between the selling
price and the tax basis of the shares (generally the fair market value of the
option shares on the date of exercise) will be a capital gain or loss (long- or
short-term, depending on the optionee's holding period for the shares). The
Company will not be entitled to a deduction as a result of such a sale.
Use of Stock To Pay Option Price. The general statement as to tax basis in the
previous paragraph relating to the disposition of stock received on the exercise
of an option applies in the event the optionee pays cash for the option shares.
If, however, the optionee pays for the option shares in whole or in part by
delivering already-owned Class A Stock or Common Stock ("old shares"), the tax
basis for the option shares, and thus the consequences of a disposition,
differs.
If an optionee delivers old shares, however acquired, in payment of all or part
of the exercise price of an option, the optionee does not recognize a gain or
loss as a result of such delivery (but the exercise continues to give rise to
taxable compensation and to a Company deduction as described above). The
optionee's tax basis in, and holding period for, the option shares is determined
as follows: as to option shares equal in number to the old shares delivered, the
basis in and holding period for the old shares carry over on a share-for-share
basis; as to each remaining share, its basis is the fair market value on the
date of exercise and its holding period begins on that date. Any capital gain or
loss on the sale of a particular option share is measured based on the
difference between the selling price and the optionee's actual tax basis for
such share.
VOTE REQUIRED FOR APPROVAL
Pursuant to the terms of the Plan, approval of the Plan requires a vote at the
annual meeting sufficient to satisfy the requirements of the General Corporation
Law of the State of Delaware, the American Stock Exchange and
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Rule 16b-3(a) under the Securities Exchange Act of 1934. Thus, the vote required
to approve the Plan is the affirmative vote of a majority of both (i) the votes
present or represented by proxy at the meeting and (ii) the total number of
shares of the Company's Common Stock and Class A Stock present or represented by
proxy at the meeting.
BOARD OF DIRECTORS' RECOMMENDATION
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS AN AFFIRMATIVE VOTE FOR THE
APPROVAL OF THE PLAN.
PROPOSAL TO APPROVE BUSINESS CRITERIA FOR CERTAIN ANNUAL BONUSES FOR THE
COMPANY'S CHIEF EXECUTIVE OFFICER
Section 162(m) of the Internal Revenue Code of 1986 (the "Code") provides that
for fiscal years commencing on or after January 1, 1994 publicly held
corporations may not deduct employee remuneration with respect to any covered
employee (generally, an employee who is the chief executive officer or one of
the other four highest compensated officers as of the end of the fiscal year) to
the extent that the amount of such covered employee's remuneration for the
fiscal year exceeds $1,000,000. Provided certain requirements are met, Code
Section 162(m) excludes certain compensation from the remuneration counted
toward the $1,000,000 limit. For example, the Company believes that the
appreciation in the value of stock options and stock appreciation rights awarded
under the Company's 1990 Stock Awards Plan with exercise or reference prices
equal to the fair market values of the Class A Stock on the dates of award is so
excluded. Generally, in order for other types of compensation to be excluded
from the remuneration counted toward the $1,000,000 limit: (1) such compensation
must be performance-based, (2) the business criterion or criteria by which
performance may be measured, and either the maximum amount of such compensation
that can be paid to any covered employee in any fiscal year or the formula under
which such compensation is to be paid, must be disclosed to and approved by the
public corporation's stockholders and (3) the formula under which such
compensation is paid for a particular fiscal year must be set not later than the
ninetieth day of that fiscal year.
In March of 1996, the Compensation Committee determined that beginning with 1996
the annual bonus paid to the Company's chief executive officer for any year
should be divided into two components, a performance-based component and a
discretionary component, and established various potential financial performance
criteria on which the performance-based component might be based. These criteria
consist of operating earnings, earnings per share, return on stockholders'
equity, return on assets, total stockholder return (i.e., appreciation in the
market value of Company stock plus dividends paid), return on invested capital,
or any combination thereof. The amount of the performance-based component paid
for a particular year will depend on the Company's achieving during the year a
goal or goals in terms of one or more of these criteria set by the Compensation
Committee not later than the ninetieth day of the year. In no event may the
amount of the performance-based component paid to the Company's chief executive
officer for any year exceed $1,000,000. The Board of Directors concluded that
stockholder approval should be obtained for the foregoing potential performance
criteria so that, if certain other conditions within the control of the
Compensation Committee are met, such performance-based components of bonus may
be excluded from Code Section 162(m).
The Compensation Committee anticipates that a majority of the potential annual
bonus payable to the Company's chief executive officer for a particular year
will consist of the performance-based component. For 1996, for example, the
performance-based component (based on operating earnings) is subject to a
maximum of $500,000 and the discretionary component is subject to a maximum of
$400,000. The Company
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is not seeking to qualify the discretionary annual components of bonus for
exclusion from Code Section 162(m).
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the votes present or represented by proxy
at the annual meeting is required for approval for purposes of Code sec. 162(m)
of the business criteria selected by the Compensation Committee for certain
annual bonuses for the Company's chief executive officer.
BOARD OF DIRECTORS' RECOMMENDATION
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS AN AFFIRMATIVE VOTE FOR THE
APPROVAL OF THE PROPOSED FINANCIAL PERFORMANCE CRITERIA FOR CERTAIN ANNUAL
BONUSES FOR THE COMPANY'S CHIEF EXECUTIVE OFFICER.
CERTAIN TRANSACTIONS
During 1995, 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 1995 by
persons who were, at any time during 1995, 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 1995.
ANNUAL REPORT
The Company's annual report for the year ended December 31, 1995 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 1997 ANNUAL MEETING
Any stockholder proposal to be considered for inclusion in proxy material for
the Company's annual meeting of stockholders in May 1997 must be received at the
principal executive offices of the Company no later than December 5, 1996.
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.
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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, 1995,
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, 1996. 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. 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
JAMES F. VONDRAK
Secretary
Chicago, Illinois
April 4, 1996
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APPENDIX A
PROPOSED AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE
AUTHORIZED STOCK
------------------------
RESOLVED, that in the opinion of the Board of Directors it is advisable that the
Restated Certificate of Incorporation, as amended, of Pittway Corporation be
further amended as follows:
The first sentence of Article FOURTH shall be amended in its entirety to read as
follows:
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is Eighty Million (80,000,000)
shares, of which Two Million (2,000,000) shares shall be designated
Preferred Stock with no par value, Thirty-Six Million (36,000,000)
shares shall be designated Class A Stock of the par value of $1.00 per
share, and Forty-Two Million (42,000,000) shares shall be designated
Common Stock of the par value of $1.00 per share.
FURTHER RESOLVED, that such amendment be submitted to the stockholders of
Pittway Corporation for consideration at Pittway Corporation's 1996 annual
meeting of stockholders.
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APPENDIX B
PITTWAY CORPORATION
1996 DIRECTOR STOCK OPTION PLAN
1. Purpose of Plan. The purpose of this Plan (the "Plan") is to promote the
long-term financial interests of the Company and its subsidiaries by:
(a) providing an incentive for all non-employee members of the Board of
Directors (the "Non-Employee Directors") to maximize the long-term value of
the Company's Class A Stock and otherwise act in the best interest of the
Company's stockholders;
(b) providing Non-Employee Directors with the opportunity to acquire a
greater stake in the future of the Company and its subsidiaries through
stock ownership; and
(c) attracting and retaining highly qualified Non-Employee Directors.
2. Definitions. The following words and phrases have the respective meanings
indicated below unless a different meaning is plainly implied by the context.
(a) "Administrative Committee" means any committee of management
employees which, pursuant to Section 4, has been appointed by the Board
Committee.
(b) "Award Date" means a date specified in Section 6 for awards of
options.
(c) "Board of Directors" means the Board of Directors of the Company.
(d) "Class A Stock" means Class A Stock, of the par value of $1.00 per
share, of the Company (or, from and after any change of such Class A Stock
into Common Stock on a share-for-share basis pursuant to the Company's
Restated Certificate of Incorporation, as amended, Common Stock).
(e) "Board Committee" means the Compensation Committee or other
committee of the Board of Directors which, pursuant to Section 3, has
authority to administer the Plan.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Common Stock" means Common Stock, of the par value of $1.00 per
share, of the Company.
(h) "Company" means Pittway Corporation, a Delaware corporation, and its
successors.
(i) "Eligible Director" means any present or future member of the Board
of Directors who, on an Award Date, (1) is a member of the Board of
Directors, and (2)is not an employee of the Company or any of its
subsidiaries.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Market Value" of Class A Stock or Common Stock on any date means
the closing price of such Stock on that date (or, if such date is not a
trading date for such Stock, on the next preceding date which was a trading
date for such Stock) on the American Stock Exchange Composite Transactions
list, as subsequently reported in The Wall Street Journal.
(l) "option" means a right awarded to a participant pursuant to the Plan
to purchase a designated number of shares of Class A Stock at a stated
price for a stated period of time. To the extent that right is exercisable
as to shares pursuant to Section 8, the participant may exercise that right
according to
B-1
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Section 10 as to all such shares at any time or as to a portion of such
shares from time to time. Options are not intended to qualify as incentive
stock options under Code Section 422.
(m) "option form" means a letter from the Board Committee (or from the
Administrative Committee or an Administrative Committee member acting on
behalf of the Board Committee or the Administrative Committee), to a
Non-Employee Director, indicating that the Non-Employee Director has been
awarded an option, the number of shares subject to the option, the option
price and the terms of exercisability of the option, and containing other
information consistent with the Plan.
(n) "participant" means an Eligible Director who has been awarded an
option.
(o) "Plan" means the plan set forth in this 1996 Director Stock Option
Plan, as it may be amended from time to time.
(p) "subsidiary" means any corporation fifty percent or more of the
voting stock of which is owned, directly or indirectly, by the Company.
(q) "trading date" for Class A Stock or Common Stock means a date for
which a sale of such Stock on the American Stock Exchange Composite
Transactions list is subsequently reported in The Wall Street Journal.
3. Administration of Plan.
(a) The Plan shall be administered by the Compensation Committee or, if
the Board of Directors so determines, by another committee consisting of
not less than two (2) members of the Board of Directors. A majority of the
Board Committee shall constitute a quorum and the acts of a majority of the
members present at any meeting at which a quorum is present, or actions
approved in writing by all members of the Board Committee, shall constitute
the acts of the Board Committee.
(b) The Board Committee shall not have authority or discretion to
determine (1) the Non-Employee Directors to be granted options, (2) the
times at which options shall be granted, (3) the number of shares subject
to any option, (4) the option price of any option, (5) the period during
which any option shall become exercisable or (6) any other option term set
forth in (as opposed to the form of and/or other information contained in)
any option form. All such matters are fixed and determinable according to
the provisions of the Plan applicable thereto.
(c) The Board Committee shall have full authority and discretion to
adopt rules and regulations and prescribe or approve the forms to carry out
the purposes and provisions of the Plan. The Board Committee's
interpretation and construction of any provision of the Plan or any option
shall be binding and conclusive, unless otherwise determined by the Board
of Directors.
4. Appointment of Administrative Committee.
(a) The Board Committee may appoint a committee of management employees
to:
(1) construe the Plan and make equitable adjustments for any
mistakes, omissions or errors made in the administration of the Plan;
(2) adopt such rules and regulations as may be deemed reasonably
necessary for the proper and efficient administration of the Plan
consistent with its purposes;
(3) enforce the Plan in accordance with its terms and with the rules
and regulations adopted for the Plan; and
B-2
<PAGE> 31
(4) do all other acts which in the Administrative Committee's
reasonable judgment are necessary or desirable for the proper and
advantageous administration of the Plan consistent with the Plan's
purposes.
(b) The Administrative Committee shall not have authority or discretion
over matters delineated in Section 3(b).
5. Shares Subject to Plan. Subject to adjustment as provided in Section 13, the
aggregate number or shares subject to options awarded under the Plan shall not
exceed 30,000 shares of Class A Stock, which may be treasury shares reacquired
by the Company or authorized and unissued shares, or a combination of both.
6. Size and Frequency of Option Awards. In each of the years 1996 through 1999,
inclusive, on the third trading date for Class A Stock following the date of the
Company's annual meeting of stockholders, each Non-Employee Director who is then
an Eligible Director and who has not theretofore been awarded an option shall be
awarded an option to purchase the number of shares of Class A Stock set forth
opposite the year below (subject to adjustment as provided in Section 13):
<TABLE>
<CAPTION>
YEAR NUMBER
---------------------------------------- ------
<S> <C>
1996.................................... 4,000
1997.................................... 3,000
1998.................................... 2,000
1999.................................... 1,000
</TABLE>
7. Option Price. The option price per share under each option shall be 100% of
the Market Value of Class A Stock on its Award Date, but in no event shall the
option price be less than the par value per share.
8. Exercisability of Options. Subject to the restrictions which follow in this
Section 8, each option will be exercisable immediately upon award as to 1,000
shares (subject to adjustment as provided in Section 13), and on each
anniversary of the date of award, provided the holder is then a member of the
Board of Directors and not an employee of the Company or any of its
subsidiaries, will become exercisable as to an additional 1,000 shares (subject
to adjustment as provided in Section 13) until such option shall have become
exercisable in full. No option may be exercised during the first six months
after it is awarded, except that this limitation shall not apply in the event of
death or disability of the participant prior to the expiration of such six month
period. In addition, an option may be exercised by a participant only during a
period beginning on the third business day following the date of release of the
Company's quarterly or annual summary statement of sales and earnings and ending
on the twelfth business day following such date.
9. Term of Option. Subject to the next sentence, each option, to the extent such
option has become exercisable, shall be exercisable for ten years from its Award
Date, after which the unexercised portion thereof shall expire. In the event of
termination of service of a participant as a member of the Board of Directors
for any reason (including without limitation expiration of term without
re-election, resignation, retirement, total disability or death), each option
previously granted to the participant shall cease to be exercisable on the fifth
anniversary of the date of termination or, if earlier, on the tenth anniversary
of the Award Date of such option. Subject to the foregoing, upon the death of a
participant, options held by the participant at death may, to the extent then
exercisable, be exercised by the legal representative of the deceased
participant's estate.
10. Exercise of Options. Shares shall be issued to a participant pursuant to the
exercise of an option only upon receipt by the Company from the participant of
written notice of exercise, specifying the number of shares with respect to
which the option is being exercised, accompanied by payment in full, either in
cash, by a single exchange of shares of Class A Stock already owned by the
participant, by a single exchange of shares
B-3
<PAGE> 32
of Common Stock already owned by the participant, or a combination thereof, in
an amount or having a combined value equal to the aggregate option price for the
shares subject to the option or portion thereof being exercised. The value of
the already owned shares of Class A Stock or Common Stock exchanged in full or
partial payment for the shares purchased upon the exercise of an option shall be
equal to the aggregate Market Value of such shares on the date of the exercise
of such option. If on the date of the exercise of the option the participant is
a member of the Board of Directors and the sale of the shares with respect to
which the option is being exercised could subject the participant to suit under
Section 16(b) of the Exchange Act, the participant's written notice of exercise
must also be accompanied by such elections and related undertakings pursuant to
Section 83(b) of the Code as the Board Committee may prescribe.
11. Nontransferability of Options. No option shall be transferable except by
will or the laws of descent and distribution. Each option shall be exercisable
during the participant's lifetime only by the participant or the participant's
legal representative.
12. Nonalienation of Benefits. No right or benefit under the Plan shall be
subject to anticipation, alienation, sale, assignment, pledge, encumbrance or
charge and any attempt to anticipate, alienate, sell, assign, pledge, encumber
or charge the same shall be void. No right or benefit under the Plan shall in
any manner be liable for or subject to the debts, contracts, liabilities or
torts of the person entitled to such benefits except such claims as may be made
by the Company or any subsidiary. If any participant or beneficiary hereunder
should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge,
encumber of charge any right or benefit under the Plan, such right or benefit
shall, in the sole discretion of the Board Committee (or of the Administrative
Committee acting on behalf of the Board Committee), cease, and in such event the
Company shall hold or apply the same or any part thereof for the benefit of such
participant or beneficiary, such person's spouse, children or their dependents,
or any of them, in such manner and in such proportion as the Committee in its
sole discretion shall determine.
13. Adjustment in Number of Shares and Option Price. In the event of any
reorganization, recapitalization, reclassification, merger, consolidation, or
sale of all or substantially all of the Company's assets followed by
liquidation, which is effected in such a way that holders of Class A Stock are
entitled to receive securities or other assets with respect to or in exchange
for Class A Stock (an "Organic Change"), the Board Committee shall make
appropriate changes to insure that each outstanding option thereafter represents
the right to purchase, in lieu of or in addition to the shares of Class A Stock
immediately theretofore purchasable upon exercise, such securities or assets as
may be issued or payable in the Organic Change with respect to or in exchange
for an equivalent number of shares of Class A Stock; and in the event of any
stock dividend, stock split or combination of shares, the Board of Directors
shall make appropriate changes in the number of shares authorized by the Plan to
be delivered thereafter, the number of shares to be subject to each option
thereafter awarded and the number of shares as to which each such option is
initially exercisable or subsequently annually becomes exercisable, and the
Board Committee shall make appropriate changes in the number of shares covered
by and option price under each outstanding option, and the number of shares as
to which each outstanding option is then exercisable or thereafter annually
becomes exercisable, in order to prevent the dilution or enlargement of option
rights. However, no right to purchase a fraction of a share shall be created;
and if, as a result of any such change, a fractional share would result or the
right to purchase the same would result, the number of shares in question shall
be decreased to the next lower whole number of shares. Any such adjustment made
by the Board of Directors or the Board Committee shall be binding and conclusive
upon all participants, the Company and all other interested persons.
14. Tax Withholding. The Board Committee (or the Administrative Committee acting
on behalf of the Board Committee) shall have the power to withhold, or to
require a participant to remit to the Company, an amount sufficient to satisfy
any withholding or other tax due with respect to the participant's exercise of
an option.
B-4
<PAGE> 33
15. Amendment. The Board of Directors may amend the Plan at any time; provided
that provisions of the Plan of the kind described in Rule 16b-3(c)(2)(ii)(A)
promulgated under the Exchange Act may not be amended more than once every six
months, other than to comport with changes in the Code, the Employee Retirement
Income Security Act, or the rules thereunder.
16. Discontinuance. The Board of Directors may terminate the Plan at any time;
provided, however, that any such termination shall not adversely affect any
outstanding option without the consent of the participant who holds it.
17. Effective Date of Plan. The effective date of the Plan shall be March 14,
1996, the date of its adoption by the Board of Directors; provided, however,
that, notwithstanding Section 6, no option shall be awarded under the Plan
unless the Plan is approved at the Company's 1996 Annual Meeting of Stockholders
by a vote sufficient to satisfy the requirements of the General Corporation Law
of the State of Delaware, the American Stock Exchange and Rule 16b-3(a)
promulgated under the Exchange Act.
B-5
<PAGE> 34
<TABLE>
<C> <C> <S>
PITTWAY CORPORATION COMMON PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
200 S. Wacker Drive STOCK Neison Harris, King Harris and James F. Vondrak (each
Chicago, IL 60606-5802 PROXY 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
9, 1996, and at any adjournment thereof as follows:
1. ELECTION OF DIRECTORS FOR all nominees listed below / / WITHHOLD AUTHORITY / /
(except as noted to the contrary below) to vote for all nominees listed
below
</TABLE>
S. Barrows, F. Conforti, L. Guthart, I. Harris, K. Harris, N. Harris, W. Harris,
J. Kahn, Jr. and L. Mullin
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. APPROVAL OF THE AMENDMENT INCREASING THE COMPANY'S AUTHORIZED STOCK
FOR / / AGAINST / / ABSTAIN / /
3. APPROVAL OF THE PITTWAY CORPORATION 1996 DIRECTOR STOCK OPTION PLAN
FOR / / AGAINST / / ABSTAIN / /
4. APPROVAL OF THE BUSINESS CRITERIA FOR CERTAIN ANNUAL BONUSES FOR THE
COMPANY'S CHIEF EXECUTIVE OFFICER
FOR / / AGAINST / / ABSTAIN / /
5. In their discretion upon such other business as may properly be brought
before the meeting.
(continued on reverse side)
<PAGE> 35
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, FOR THE AMENDMENT INCREASING THE COMPANY'S AUTHORIZED STOCK, FOR
APPROVAL OF THE PITTWAY CORPORATION 1996 DIRECTOR STOCK OPTION PLAN AND FOR
APPROVAL OF THE BASES FOR CERTAIN ANNUAL BONUSES.
<TABLE>
<S> <C>
Dated , 1996 ----------------------------------------
----------------------------
----------------------------------------
(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> 36
<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 James F. Vondrak (each
Chicago, IL 60606-5802 PROXY 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 9,
1996, and at any adjournment thereof as follows:
1. ELECTION OF DIRECTORS FOR all nominees listed below / / WITHHOLD AUTHORITY / /
(except as noted to the contrary below) to vote for all nominees listed
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. APPROVAL OF THE AMENDMENT INCREASING THE COMPANY'S AUTHORIZED STOCK
FOR / / AGAINST / / ABSTAIN / /
3. APPROVAL OF THE PITTWAY CORPORATION 1996 DIRECTOR STOCK OPTION PLAN
FOR / / AGAINST / / ABSTAIN / /
4. APPROVAL OF THE BUSINESS CRITERIA FOR CERTAIN ANNUAL BONUSES FOR THE
COMPANY'S CHIEF EXECUTIVE OFFICER
FOR / / AGAINST / / ABSTAIN / /
5. In their discretion upon such other business as may properly be brought
before the meeting.
(continued on reverse side)
<PAGE> 37
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, FOR THE AMENDMENT INCREASING THE COMPANY'S AUTHORIZED STOCK, FOR
APPROVAL OF THE PITTWAY CORPORATION 1996 DIRECTOR STOCK OPTION PLAN AND FOR
APPROVAL OF THE BASES FOR CERTAIN ANNUAL BONUSES.
<TABLE>
<S> <C>
Dated _____________________________, 1996 ________________________________________
________________________________________
(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> 38
<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 James F. Vondrak (each
Chicago, IL 60606-5802 PROXY 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 9,
1996, and at any adjournment thereof as follows:
1. ELECTION OF DIRECTORS FOR all nominees listed below / / WITHHOLD AUTHORITY / /
(except as noted to the contrary below) to vote for all nominees listed
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. APPROVAL OF THE AMENDMENT INCREASING THE COMPANY'S AUTHORIZED STOCK
FOR / / AGAINST / / ABSTAIN / /
3. APPROVAL OF THE PITTWAY CORPORATION 1996 DIRECTOR STOCK OPTION PLAN
FOR / / AGAINST / / ABSTAIN / /
4. APPROVAL OF THE BUSINESS CRITERIA FOR CERTAIN ANNUAL BONUSES FOR THE
COMPANY'S CHIEF EXECUTIVE OFFICER
FOR / / AGAINST / / ABSTAIN / /
5. In their discretion upon such other business as may properly be brought
before the meeting.
(continued on reverse side)
<PAGE> 39
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, FOR THE AMENDMENT INCREASING THE COMPANY'S AUTHORIZED STOCK, FOR
APPROVAL OF THE PITTWAY CORPORATION 1996 DIRECTOR STOCK OPTION PLAN AND FOR
APPROVAL OF THE BASES FOR CERTAIN ANNUAL BONUSES.
<TABLE>
<S> <C>
Dated _____________________________, 1996 ________________________________________
________________________________________
(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>
