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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. 3)
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Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
DETECTION SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
ULTRAK, INC.
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(Name of Person(s) Filing Proxy Statement)
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Payment of Filing Fee (Check the appropriate box):
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/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
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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):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
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DETECTION SYSTEMS, INC.
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2000 ANNUAL MEETING OF STOCKHOLDERS
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PROXY STATEMENT OF ULTRAK, INC. IN OPPOSITION TO THE BOARD OF DIRECTORS OF
DETECTION SYSTEMS, INC.
This Proxy Statement is being furnished to holders of common stock, par
value $0.05 per share ("Common Stock"), of Detection Systems, Inc., a New York
corporation (the "Company"), in connection with the solicitation of proxies for
use at the 2000 Annual Meeting of Stockholders of the Company and at any and all
adjournments or postponements thereof (the "Annual Meeting"). The Company's
principal executive offices are located at 130 Perinton Parkway, Fairport, New
York 14450. The solicitation is being conducted by Ultrak, Inc. ("Ultrak").
Ultrak's principal executive offices are located at 1301 Waters Ridge Drive,
Lewisville, Texas 75057. Ultrak beneficially owns approximately 21% of the
outstanding Common Stock. As more fully discussed below, Ultrak is soliciting
proxies in connection with the Annual Meeting for the election of Ronald F.
Harnisch, Robert L. Frome and William D. Breedlove as directors of the Company
(collectively, the "Ultrak Nominees" and each, an "Ultrak Nominee"), to serve
until their successors are duly elected and qualified.
The Company has announced that it will not schedule the Annual Meeting until
it has completed its study of strategic alternatives for resolving the pending
proxy contest. Only stockholders of record at the close of business on the
record date for the Annual Meeting (the "Record Date"), which has not yet been
announced by the Company, will be entitled to notice of and to vote at the
Annual Meeting.
The BLUE proxy card to be supplied by Ultrak after the Record Date has been
set may be executed by holders of record as of the Record Date. You are urged to
sign and date the BLUE proxy card to be supplied by Ultrak and return it in the
enclosed envelope whether or not you attend the meeting.
YOUR VOTE IS IMPORTANT. If you agree with the reasons for Ultrak's
solicitation set forth in this Proxy Statement and believe that the election of
the Ultrak Nominees to the Board of Directors can make a difference, we urge you
to vote for the election of Ultrak's nominees, no matter how many or how few
shares you own.
Ultrak urges you NOT to sign any proxy card that is sent to you by the
Company.
If you have any questions, please call:
Georgeson Shareholder Communications Inc.
17 State Street, 10th Floor
New York, New York 10004
(800) 223-2064
This Proxy Statement is first being sent or given to stockholders on or
about August 15, 2000.
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GENERAL
At the Annual Meeting, five directors are to be elected to the Company's
Board of Directors (the "Board of Directors") to hold office for a one-year term
and until their successors have been elected and qualified. Ultrak is seeking
your proxy for the election to the Board of Directors of three individuals--
Ronald F. Harnisch, Robert L. Frome and William D. Breedlove (the "Ultrak
Nominees"). If each of the Ultrak Nominees are elected, the Ultrak Nominees will
constitute a majority of the Company's Board of Directors.
The Company reported in its annual report on Form 10-K filed on June 29,
2000 that, as of June 2, 2000, the Company's outstanding voting securities
consisted of 6,364,000 shares of Common Stock. The holders of a majority of
shares of Common Stock entitled to vote at the Annual Meeting, present in person
or by proxy, constitute a quorum under the Company's bylaws. Each share of
Common Stock entitles its owner to one vote, and a plurality of votes cast at a
meeting at which a quorum is present or otherwise represented is necessary to
elect each of the Ultrak Nominees. For information concerning voting procedures
at the Annual Meeting, see "Voting and Proxy Procedures."
Ultrak is a Delaware corporation and is in the business of designing,
manufacturing, marketing, selling and servicing innovative electronic products
and systems for use in security and surveillance, industrial video and
professional audio markets worldwide. Ultrak beneficially owns 1,335,100 shares
of Common Stock, representing approximately 21% of the outstanding shares of
Common Stock.
REASONS FOR THIS SOLICITATION
Ultrak has nominated the Ultrak Nominees for election as directors to help
ensure that the Board of Directors addresses Ultrak's concerns regarding
shareholder value. Specifically, if elected, the Ultrak Nominees will seek to
cause the Board of Directors to retain an investment banking firm, which would
be charged with reviewing all strategic alternatives available to the Company,
including a sale of the Company. Ultrak wants to cause the Company to hire an
investment banker and to explore the possibility of a sale of the Company and
other alternatives in order to provide to stockholders the value that Ultrak
believes management has failed to produce.
Ultrak believes, based on discussions with Robert Bosch, GmbH and other
third parties (described below under "Background of Ultrak's Efforts to Increase
Value for the Company's Shareholders"), that one or more companies in the
Company's industry are interested in purchasing the Company and that such
potential purchasers understand that a successful purchase of the Company would
require the payment of a premium. There can be no assurance that Bosch or such
other third parties will remain interested in purchasing the Company, and there
can be no assurance that any such sale will occur or as to the price at which
any such sale may be proposed or consummated.
Ultrak is not a potential buyer of the Company and in fact would be
precluded until October 30, 2003 from buying the Company under Section 912 of
the New York Business Corporation Law, which provides that once a person
acquires 20% or more of a New York corporation's voting stock without prior
board approval, such person cannot enter into a "business combination" with the
corporation for a period of five years even if the board approves the business
combination prior to the end of the five-year period. The Ultrak Nominees are
neither employees nor directors of Ultrak and, if elected, will act in the best
interests of the Company's shareholders.
ANEMIC STOCK PERFORMANCE
The Company's stock performance over the past five fiscal years has been
relatively poor, showing just a 13.8% compound annual growth rate over that
period (based on reported closing stock prices on March 31, 1995 and March 31,
2000). Meanwhile, the Nasdaq Composite Index, to which the Company compared its
own stock in the Company's proxy statement dated July 8, 1999 relating to the
1999 Annual
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Meeting of Stockholders (the "Company Proxy Statement") has shown a 41.6%
compound annual growth rate over that same period. (For the previous five-year
period ended March 31, 1999, the Company showed a 4.9% compound annual growth
rate as compared to a 27.9% compound annual growth rate for the Nasdaq Composite
Index.) As a 21% shareholder, Ultrak is disappointed with these results and
believes that a sale of the Company could provide substantially greater value to
shareholders than the historical performance of the Common Stock. Ultrak
believes that a sale of the Company could provide substantially greater value to
shareholders because acquisition premiums are typically in excess of the 13.8%
and 4.9% compound annual growth rates referred to above, based on acquisition
premiums in all industries.
INDUSTRY CONSOLIDATION
Ultrak believes that the security industry in the United States is
undergoing significant consolidation and that this consolidation will
disadvantage smaller companies like Detection Systems. Recently, Honeywell,
which is the Company's largest customer, acquired Pittway, identified by the
Company as one of its two major competitors. As a result of this acquisition,
Ultrak believes it is likely that the Company will lose out on sales to
Honeywell and that Pittway will be strengthened as a competitor to the Company.
Ultrak believes, based on conversations with industry participants, that a
number of companies with interests in the security industry are interested in
purchasing the Company as a means to enhance their own competitive positions
within this consolidating industry.
LUCRATIVE GOLDEN PARACHUTES FOR MANAGEMENT
Management of the Company has implemented golden parachutes and retirement
benefits that Ultrak believes are extraordinarily expensive in relation to the
size of the Company and that Ultrak does not believe are in the best interests
of the Company. The Company approved employment agreements for Karl H. Kostusiak
and David B. Lederer that would result in the payment of golden parachute and
retirement benefits to these officers if they were to quit, for any reason, upon
a "change of control" of the Company. These agreements are broadly worded, so
that either officer could walk away from the Company with huge payments even if
a majority of the Company's shareholders became dissatisfied with the Company's
management and performance and voted out only two of the Company's five current
directors. (If even two of the three Ultrak Nominees are elected, there would be
a "change of control" under these golden parachute agreements.) This package
provides for benefits that could exceed $7.9 million, in the aggregate, for
Messrs. Kostusiak and Lederer. Of that figure, approximately $2.0 million would
be payable immediately upon the change of control, and the remaining
$5.9 million (which represents a present value) would be paid at various stages
in the remainder of the lives of Messrs. Kostusiak and Lederer and their
spouses. The aggregate figure represents more than 13% of the Company's market
value as of the close of business on June 29, 2000 and approximately 228% of the
Company's net income for its fiscal year ended March 31, 2000.
As the holder of 21% of the Common Stock, Ultrak is amazed at the potential
magnitude of these benefits and the fact that they can be unilaterally triggered
by Messrs. Kostusiak and Lederer even where the shareholders feel compelled to
make changes in the Board of Directors for reasons of poor performance by the
Company's management. These rich contracts that the Board of Directors has
awarded Messrs. Kostusiak and Lederer could have the absurd result of rewarding
management extravagantly for failure!
For a more detailed estimate of the potential costs of these golden
parachutes, please refer to Appendix A to this Proxy Statement.
RECENT BYLAW AMENDMENTS
Earlier this year, the Company amended its bylaws to further regulate
shareholder meetings. The Company removed a provision that allowed a majority of
shareholders to call a special meeting. As a
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result, shareholders can only exercise their rightful control over the
composition of the Board of Directors and take other proper shareholder action
at an annual meeting or a special meeting called by the Company. In addition,
the Company added to the bylaws requirements that shareholders who are
nominating candidates for the Board of Directors or making other proposals do so
no less than 90 days and no more than 120 days before the anniversary of the
previous year's annual meeting. Prior to the amendments, there was no prior
notification requirement for shareholder proposals under the Company's bylaws or
otherwise. The bylaw amendments are applicable to the 2000 Annual Meeting, and
Ultrak complied with these requirements on May 12, 2000.
Ultrak believes that the Board of Directors adopted these bylaw amendments
to further insulate itself from accountability to shareholders. Ultrak holds
this belief because these bylaw amendments impose limitations on shareholders'
rights to take action at shareholder meetings and because these bylaw amendments
were adopted against a background of extensive efforts by George K. Broady,
Chairman of the Board and Chief Executive Officer of Ultrak, to cause the Board
of Directors to seek a sale of the Company. Ultrak believes that it is likely
that the Board of Directors was aware that Ultrak, as a significant shareholder
that believed the Company should be sold, might seek to exercise its
shareholder's rights to promote that goal.
BACKGROUND OF ULTRAK'S EFFORTS TO INCREASE VALUE FOR THE COMPANY'S
SHAREHOLDERS
In May 1999, George K. Broady, Chairman of the Board and Chief Executive
Officer of Ultrak, contacted representatives of Robert Bosch, GmbH, one of
Germany's largest industrial conglomerates ("Bosch"), to determine whether Bosch
would be interested in learning more about the Company and in purchasing the
Company. Mr. Broady was aware that Bosch had sought unsuccessfully to acquire a
U.S. competitor of the Company. Following a meeting in Germany between
Mr. Broady and representatives of Bosch, Bosch indicated to Mr. Broady that it
would be interested in exploring such an opportunity.
In the fall of 1999, Mr. Broady contacted Karl H. Kostusiak, Chairman,
President and Chief Executive Officer of the Company, to determine whether he
would be interested in meeting with representatives of Bosch. Mr. Kostusiak was
open to a meeting, although he indicated to Mr. Broady that he was not
interested in selling the Company, but rather would like to explore other
business relationships with Bosch. At a meeting arranged and attended by
Mr. Broady, representatives of Bosch and the Company each made presentations to
the other about their respective businesses. Bosch asked to visit the Company's
manufacturing facility in China, and Mr. Kostusiak made the necessary
arrangements. Mr. Broady was advised that representatives of Bosch and the
Company subsequently had several other meetings by telephone and in person, both
in the United States and Germany.
Once Bosch had decided it was interested in purchasing the Company, it
involved its investment banking firm in the U.S. and held discussions with
Mr. Kostusiak during the fall of 1999. After several discussions between Bosch
and Mr. Kostusiak by telephone and in person, Mr. Kostusiak advised Mr. Broady
and Bosch that he was not interested in selling the Company. Bosch requested
more detailed information about the Company and a meeting with the top
operations personnel of the Company. Mr. Broady was advised by Bosch that
Mr. Kostusiak was not willing to provide access to the requested information or
to the operations personnel. Despite this resistance, Bosch indicated in writing
in February 2000 to the Company that Bosch was interested in purchasing the
Company, although Bosch did not submit a formal proposal because it understood
that the Company did not want to receive such an offer.
In February 2000, Mr. Kostusiak agreed to permit Mr. Broady to address the
Board of Directors by telephone. Mr. Broady encouraged the Company to seek a
strategic partner through a sale of the Company, given the general economic
climate and consolidation in the security industry. Mr. Broady detailed his
reasons, including the fact that the Company's sales in the United States, its
largest market, were stagnant or declining and that the Company risked losing
important customers through industry
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consolidation (including as a result of Honeywell's acquisition of Pittway). The
Board of Directors did not accept this suggestion or provide to Mr. Broady an
explanation for its rejection.
At a meeting of the Board of Directors on February 21, 2000, the Board of
Directors adopted the bylaw amendments referred to above.
Beginning in October 1999, Mr. Broady also explored the possibility that
other parties might be interested in purchasing the Company. Mr. Broady spoke
with four other major companies that he believed were interested in considering
a purchase of the Company, two of which, to Mr. Broady's knowledge, contacted
the Company's management directly. Mr. Broady has not been advised of the
outcome of those contacts. Mr. Broady was told by senior managers of all four of
these companies that they were only interested in pursuing a negotiated
transaction and that they did not perceive the Company to be amenable to a sale.
In addition, one of these companies (in addition to Bosch) shared with
Mr. Broady its concern about the magnitude of the golden parachute payments that
would have to be made to Messrs. Kostusiak and Lederer. Throughout this period,
Mr. Broady had regular and frequent telephone conversations with Bosch and
Mr. Kostusiak. When Mr. Broady raised the golden parachute problem,
Mr. Kostusiak dismissed the issue as not being material or important.
In conversations with Bosch, Mr. Broady was told that Bosch was very
concerned with the size of the golden parachutes that were currently in place.
In those discussions, Bosch indicated that any valuation of the Company had to
account for the cost of the golden parachutes, and would reduce the amount that
could be offered to Company's shareholders. Bosch also told Mr. Broady, directly
and through its investment banker, that Bosch did not want to pursue an
unfriendly acquisition of the Company and that Mr. Kostusiak still did not want
to sell the Company despite all of Bosch's efforts to persuade him otherwise.
On March 30, 2000, Mr. Kostusiak called Mr. Broady to inform him that the
Company's management would seek to undertake and participate in a leveraged
buyout of the Company and stated that the Company was in discussions with
several buyout firms. Mr. Broady asked Mr. Kostusiak if Bosch was aware of this
latest development. Mr. Kostusiak said that Bosch was not aware of it, but that
he would probably tell them. Mr. Broady indicated that he believed Bosch ought
to know this and that other parties should have an opportunity to bid for the
Company as well and should be furnished with the same financial information that
Mr. Kostusiak had furnished to the buyout firms.
In a conversation in late April 2000, Mr. Kostusiak notified Mr. Broady that
Larry Tracy, who had been in charge of the Company's international business, had
left the Company to work for the combined Pittway-Honeywell business, a major
competitor of the Company. Mr. Kostusiak stated to Mr. Broady that he now
thought it might be in the best interests of the Company to sell to Bosch in
light of competitive concerns.
In early May 2000, Bosch met with, and received an updated product
presentation from, the Company and engaged in discussions with the Company about
various strategic possibilities, including majority ownership by Bosch. Two or
three weeks after those discussions, Bosch reiterated its interest in acquiring
100% of the Company, but, according to Bosch, the Company was only receptive to
discussing the possibility of a majority investment in the Company by Bosch,
rather than a complete acquisition of the Company. Mr. Kostusiak reported to
Mr. Broady that Bosch was "duly impressed" with the Company's technology and
that discussions with Bosch would continue.
In early May 2000, Mr. Broady contacted Mr. Kostusiak and indicated that,
although he was pleased that discussions would continue with Bosch, in light of
Mr. Kostusiak's past reluctance to sell the Company, Mr. Broady simply could not
rely on this continued willingness without some formal reassurance. At this same
time Mr. Broady indicated his desire to avoid the cost and distraction to Ultrak
and the Company of a lengthy proxy fight. Mr. Broady indicated that he would be
more comfortable if Ultrak had board representation and discussed with
Mr. Kostusiak ways to avoid a proxy fight at the Company's 2000
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Annual Meeting. In light of the deadline under the recent bylaw amendments for
advance notification of director nominations, Mr. Broady proposed through
counsel to resolve the issue through an agreement under which the Company would
call a special meeting at the request of Ultrak if the Company's discussions
with Bosch failed to produce tangible results. The purpose of that special
meeting would have been to permit Ultrak to cause the election of a majority of
the Board of Directors that would be independent of management and that would
consider favorably a possible sale of the Company or any alternative that would
produce more value for the Company's shareholders. The Company would not agree
to this proposal, and on May 12, 2000, Ultrak gave notice to the Company of its
director nominations.
ULTRAK STRONGLY RECOMMENDS A VOTE FOR THE ELECTION OF ULTRAK NOMINEES.
NOMINEES FOR ELECTION AS DIRECTORS
The Company Proxy Statement discloses that the Board of Directors currently
consists of five directors, each serving a term of one year. Based on the
information in the Company Proxy Statement, five directors are to be elected at
the Annual Meeting. The directors so elected will serve in such capacity for a
one-year term to expire at the 2001 Annual Meeting of Stockholders and until
their successors are elected and qualified.
On May 12, 2000, Ultrak gave notice to the Company of its intention to
nominate at the 2000 Annual Meeting five individuals to serve as directors of
the Company. Subsequently, Ultrak determined that the election of two of its
nominees to the Board of Directors could be problematic due to the fact that
Ultrak and the Company have competitive products and that Ultrak's directors
might be precluded from serving as Company directors under applicable antitrust
laws. Accordingly, on June 16, 2000, Ultrak advised the Company that it would
nominate only three of the five originally proposed nominees.
If all of the Ultrak Nominees are elected to the Board of Directors, they
would constitute a majority of the Board. The golden parachute agreements
between the Company and each of Messrs. Kostusiak and Lederer provide that such
a change in the composition of a majority of the Board of Directors would
entitle Messrs. Kostusiak and Lederer to voluntarily quit as officers of the
Company and receive the benefits described above under the caption "REASONS FOR
THIS SOLICITATION--Lucrative Golden Parachutes for Management" and illustrated
below in Appendix A to this proxy statement. Under the terms of the golden
parachute agreements in such circumstances, the golden parachute payments would
be due without regard to whether the Company is sold or enters into an
alternative transaction that might provide greater value for the Company's
shareholders.
Ultrak has commenced litigation seeking to invalidate the golden parachute
agreements and to preliminarily and permanently enjoin the making of any
payments under them, as well as for other relief, by filing a shareholder
derivative complaint on June 30, 2000 in the United States District Court for
the Western District of New York (the "Court") against the Company's five
current directors, including Messrs. Kostusiak and Lederer. The complaint
alleges, among other things, that the golden parachute agreements:
- provide for payments to Kostusiak and Lederer that are so significant in
amount as to constitute a breach of their fiduciary duties to the Company
and its shareholders
- provide that "if either Kostusiak or Lederer is terminated for
cause--narrowly defined to include, among other things, such egregious
acts as theft of Company funds--he would still be entitled to receive full
benefits for three years or for the remainder of the five year duration of
the Agreement, whichever is longer, subject only to repayment of any
monetary damages suffered by the Company"
- discourage and impair transactions, such as a sale or merger of the
Company, that may enhance shareholder value and
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- limit "efforts to enhance shareholder value or any change in composition
of the Company's Board of Directors because would-be acquirors or even
shareholders desiring to obtain just minority representation on the Board
face the prospect that, if successful, they will trigger the dissipation
of a sizeable portion of the Company's value to Kostusiak and Lederer."
Ultrak intends to move for a preliminary injunction in advance of the 2000
Annual Meeting. On July 11, 2000, Ultrak filed an amended complaint and an
application for expedited discovery in connection with its upcoming motion for a
preliminary injunction. On the following day, the defendants filed papers in
opposition to Ultrak's application for expedited discovery, as well as a motion
to dismiss the amended complaint. Defendants' motion to dismiss does not
challenge the adequacy of Ultrak's allegations concerning the economic import of
the golden parachutes or their legal impropriety, but is limited to an attack
upon Ultrak's adequacy as a derivative plaintiff. Subsequently, both Ultrak and
the defendants filed further papers in connection with Ultrak's application for
expedited discovery. As of the time of filing hereof, the Court has not ruled
upon Ultrak's application. Ultrak will respond to defendants' motion to dismiss
according to a briefing schedule to be set by the Court.
Ultrak is proposing the election of the three Ultrak Nominees to the Board
of Directors. Ultrak does not expect that any of the Ultrak Nominees will be
unable to stand for election, but in the event that a vacancy in the slate of
Ultrak Nominees should occur unexpectedly, the shares of Common Stock
represented by the proxy card furnished by Ultrak will be voted for a substitute
candidate selected by Ultrak. If the Company expands the size of the Board of
Directors subsequent to the date of this proxy statement and Ultrak determines
to add nominees, Ultrak will supplement this proxy statement. If, however, the
Company does not leave reasonable time before the 2000 Annual Meeting to
supplement this proxy statement, Ultrak reserves the right to nominate
additional nominees and to use the discretionary authority granted by the
proxies it is soliciting to vote for such additional nominees, or to seek
judicial relief.
The following information concerning age, principal occupation and business
experience during the last five years, and current directorships has been
furnished to Ultrak by the Ultrak Nominees, all of whom have expressed their
willingness to serve on the Board of Directors if elected.
RONALD F. HARNISCH, age 57, has been a practicing attorney since 1971 and
has been in private practice as a sole practitioner for over the last 10 years.
ROBERT L. FROME, age 62, has been the managing partner of the law firm of
Olshan, Grundman, Frome, Rosenzweig & Wolsky, LLP for over 20 years. He
currently sits on the boards of directors of Health Care Services Group, Inc.
and NUCO 2.
WILLIAM D. BREEDLOVE, age 60, has been the Chairman of Breedlove, Wesneski,
Co. since 1984 and is currently the Vice Chairman of HBW Holdings, the parent
company of Breedlove, Wesneski, Co. He currently sits on the board of directors
of NCI Building Systems.
If elected, each Ultrak Nominee would receive such directors' fees as may be
payable by the Company in accordance with its practice at the time. There are no
other understandings or arrangements between Ultrak and any Ultrak Nominee
relating to the matters contemplated by this Proxy Statement.
Additional information concerning the Ultrak Nominees is set forth in
Appendices A and B to this Proxy Statement.
SOLICITATION; EXPENSES
Proxies may be solicited by mail, advertisement, telephone, facsimile,
telegraph and personal solicitation. Proxies may be similarly solicited by
Ultrak and by the Ultrak Nominees. No additional compensation will be paid to
Ultrak and to the Ultrak Nominees for the solicitation of proxies. Banks,
brokerage houses and other custodians, nominees and fiduciaries will be
requested to forward the Ultrak solicitation
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material to their customers for whom they hold shares and Ultrak will reimburse
them for their reasonable out-of-pocket expenses.
George K. Broady may be deemed to be a "participant" in the solicitation as
described in Item 4(b) of Schedule 14A. Through his ownership of Ultrak's common
and preferred stock, Mr. Broady controls approximately 31% of the voting power
of all outstanding shares of Ultrak's capital stock. Mr. Broady's business
address is 1301 Waters Ridge Drive, Lewisville, Texas 75057, and his principal
occupation is acting as Chairman of the Board and Chief Executive Officer of
Ultrak. Neither Mr. Broady nor any of his associates (other than Ultrak) holds,
nor within the past two years has held, securities of the Company beneficially
or of record. Mr. Broady is not and has not within the past year been a party to
any contract, arrangement or understanding with any person with respect to any
securities of the Company. Neither Mr. Broady nor any of his associates has
entered into any transaction, or series of similar transactions, since the
beginning of the Company's last fiscal year, or any currently proposed
transaction, or series of similar transactions, to which the Company or any of
its subsidiaries was or is to be a party, in which any of the persons described
in Item 404(a) of Regulation S-K had, or will have, a direct or indirect
material interest. Neither Mr. Broady nor any of his associates have any
arrangement or understanding with any person (1) with respect to any future
employment by the Company or its affiliates, or (2) with respect to any future
transactions to which the Company or any of its affiliates will or may be a
party. No other employees of Ultrak are participants in the solicitation.
Ultrak has retained Georgeson Shareholder Communications Inc. ("Georgeson")
to assist in the solicitation of proxies and for related services. Ultrak will
pay Georgeson an estimated fee of up to $25,000 and has agreed to reimburse it
for its reasonable out-of-pocket expenses. Approximately 50 persons will be used
by Georgeson in its solicitation efforts.
The entire expense of preparing, assembling, printing and mailing this Proxy
Statement and related materials and the cost of soliciting proxies will be borne
by Ultrak.
Ultrak estimates that the total expenditures relating to its proxy
solicitation incurred by Ultrak, including expenditures in connection with
litigation challenging the Company's golden parachute agreements, will be
approximately $500,000, approximately $250,000 of which has been incurred to
date. Ultrak intends to seek reimbursement from the Company for those expenses
incurred by Ultrak if the Ultrak Nominees are elected to the Board of Directors.
It does not intend to propose to the Board of Directors that the question of
such reimbursement be put to a vote of the Company's stockholders.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS AND MANAGEMENT
See Appendix D for information regarding persons who beneficially own more
than 5% of the Common Stock and the ownership of the Common Stock by Company
management and the members of the Board of Directors.
VOTING AND PROXY PROCEDURES
For the proxy solicited hereby to be voted, the BLUE proxy card to be
supplied by Ultrak must be signed, dated and returned to Ultrak, c/o Georgeson
Shareholder Communications Inc., 17 State Street, 10th Floor, New York, New York
10004 in the enclosed envelope in time to be voted at the Annual Meeting. IF YOU
WISH TO VOTE FOR THE ULTRAK NOMINEES, YOU MUST SUBMIT THE BLUE PROXY CARD TO BE
SUPPLIED BY ULTRAK AND MUST NOT SUBMIT THE COMPANY'S PROXY CARD, EVEN IF YOU
WISH TO VOTE FOR ANY OF THE COMPANY NOMINEES. ONCE YOU HAVE RETURNED THE
COMPANY'S PROXY CARD TO THE COMPANY, YOU HAVE THE RIGHT TO REVOKE IT AS TO ALL
MATTERS COVERED THEREBY AND MAY DO SO BY SUBSEQUENTLY SIGNING, DATING AND
MAILING THE ENCLOSED BLUE PROXY CARD. ONLY YOUR LATEST DATED PROXY WILL COUNT AT
THE ANNUAL MEETING.
8
<PAGE>
If your shares are held in the name of a brokerage firm, bank or nominee,
only that entity can vote such shares and only upon receipt of your specific
instruction. Accordingly, we urge you to contact the person responsible for your
account and instruct that person to execute on your behalf the BLUE proxy card.
Execution of a BLUE proxy card will not affect your right to attend the
Annual Meeting and to vote in person. Any proxy may be revoked as to all matters
covered thereby at any time prior to the time a vote is taken by (i) filing with
the Secretary of the Company a later dated written revocation, (ii) submitting a
duly executed proxy bearing a later date to the Secretary of the Company or
(iii) attending and voting at the Annual Meeting in person. Attendance at the
Annual Meeting will not in and of itself constitute a revocation.
The holders of a majority of shares of Common Stock entitled to vote at the
Annual Meeting, present in person or by proxy, constitute a quorum under the
Company's bylaws. Election of the Ultrak Nominees requires the affirmative vote
of a plurality of the votes cast on the matter at the Annual Meeting, assuming a
quorum is present or otherwise represented at the Annual Meeting. Consequently,
only shares of Common Stock that are voted in favor of a particular nominee will
be counted toward such nominee's attaining a plurality of votes. Shares of
Common Stock present at the Annual Meeting that are not voted for a particular
nominee (including broker non-votes) and shares of Common Stock present by proxy
where the stockholder properly withheld authority to vote for such nominee will
not be counted toward such nominee's attainment of a plurality.
Shares of Common Stock represented by a valid, unrevoked BLUE proxy card
will be voted as specified. You may vote FOR the election of the Ultrak Nominees
or withhold authority to vote for the election of the Nominees by marking the
proper box on the BLUE proxy card. You may also withhold your vote from any of
the Ultrak Nominees by writing the name of such nominee in the space provided on
the BLUE proxy card. If no specification is made, such shares will be voted FOR
the election of all of the Ultrak Nominees. Therefore, if you want your vote to
be counted for the election of the Ultrak Nominees, you must execute and return
a BLUE proxy card.
Except as set forth in this Proxy Statement, Ultrak is not aware of any
other matter to be considered at the Annual Meeting. However, if Ultrak learns
of any other proposals made at a reasonable time before the Annual Meeting,
Ultrak will either supplement this Proxy Statement and provide an opportunity to
Stockholders to vote by proxy directly on such matter or will not exercise
discretionary authority with respect thereto. If other proposals are made
thereafter the persons named as proxies on the BLUE proxy card to be supplied by
Ultrak will vote proxies solicited hereby in their discretion.
Only holders of record of Common Stock on July 3, 2000, the Record Date
established by the Board of Directors for the Annual Meeting, will be entitled
to vote at the Annual Meeting. If you are a stockholder of record on the Record
Date, you will retain the voting, rights in connection with the Annual Meeting
even if you sell such shares after the Record Date. Accordingly, it is important
that you vote the shares of Common Stock held by you on the Record Date, or
grant a proxy to vote such shares on the BLUE proxy card, even if you sell such
shares after such date.
Because Ultrak intends to solicit proxies for only three of the available
seats, execution of the BLUE proxy card to be supplied by Ultrak will revoke
previous proxies and, therefore, in choosing to vote for the Ultrak Nominees,
shareholders will not be able to vote for the full complement of five directors.
If the Ultrak Nominees are elected, the Company's nominees elected to fill the
other two seats might decline to serve, but the existence of two vacancies on
the Board of Directors will not affect the ability of the Board of Directors to
act. If the Company's nominees who are elected do serve with the Ultrak
Nominees, there might be a "split" on the Board of Directors. In all events,
Board action may be taken by a majority of the directors present at a meeting at
which a quorum has been established. A quorum is a majority of the whole Board
of Directors, currently three of the five directors. The Ultrak Nominees do not
currently have
9
<PAGE>
any plans to fill any vacancies that may exist or be created on the Board of
Directors and will consider any such possibility if and when it should occur.
Ultrak believes that it is in your best interest to elect the Ultrak
Nominees at the Annual Meeting because the Ultrak Nominees are committed to
actively exploring a sale of the Company or any other alternative that might
provide greater shareholder value than a sale. There can be no assurance that
the election of the Ultrak Nominees or a sale of the Company will maximize
shareholder value. ULTRAK STRONGLY RECOMMENDS A VOTE FOR THE ELECTION OF THE
ULTRAK NOMINEES.
10
<PAGE>
ADDITIONAL INFORMATION
An Ultrak subsidiary is party to an Amended and Restated Credit Agreement
among Ultrak Operating, L.P., American National Bank and Trust Company of
Chicago and Certain Lenders, dated March 22, 2000, which provides for a
$45,000,000 revolving line of credit. Pursuant to this agreement, if Ultrak
sells all of its shares of Common Stock, whether in connection with a sale of
the Company or otherwise, the proceeds of such sale must be applied to reduction
of this debt. If Ultrak sells all of its shares and complies with the
application of proceeds requirement, it would be entitled to a 0.25% reduction
on the interest rate under this agreement.
Reference is made to the proxy statement that will be furnished by the Board
of Directors for information concerning the Company's management, the procedures
for submitting proposals for consideration at the next Annual Meeting of
Stockholders of the Company and certain other matters regarding the Company and
the Annual Meeting. The Company also is required to provide to stockholders its
Annual Report to Stockholders for the year ended March 31, 2000, which contains
certain information as to the Company's financial condition and other matters.
Ultrak will not verify, and assumes no responsibility for, the accuracy or
completeness of any such information.
ULTRAK, INC.
August 15, 2000
11
<PAGE>
APPENDIX A
GOLDEN PARACHUTE PAYMENTS
The following chart, prepared on August 4, 2000 for Ultrak at Ultrak's
expense by an independent accounting firm from publicly available information
and assumptions believed by such independent accounting firm to be reasonable,
illustrates the very substantial payments that Messrs. Kostusiak and Lederer
could demand under their golden parachute agreements with the Company if a
change of control of the Company were to occur and if they were to quit or have
their employment terminated. The independent accounting firm has consented to
the use of the chart and does not object to its use in this proxy statement, but
has advised Ultrak that Ultrak may not identify this firm in the proxy
statement. Unless otherwise indicated as an assumption or an estimate, all
information for these calculations has been taken from the following of the
Company's reports and statements (including employment agreements attached to
such reports and statements) filed with the Securities and Exchange Commission
(the "SEC"): Definitive Proxy Statement for 1997 Annual Meeting, Definitive
Proxy Statement for 1999 Annual Meeting, Periodic Report on Form 10-Q for the
quarter ended December 31, 1999 and Annual Report on Form 10-K for the fiscal
year ended March 31, 2000. The chart does not:
- take into account the value of any Company repayment of loans against
Messrs. Kostusiak and Lederer's life insurance policies that they may have
taken out or may take out prior to the change of control. For each dollar
of the loan repaid by the Company, the Company also will be liable for a
gross-up payment of $3.08 under the terms of the golden parachute
agreements;
- reflect the fact that $1,464,572 of these payments (plus any amount of
loan repayment and gross-up with respect thereto) would not be deductible
by the Company as an expense;
- reflect the value of any options that the Board of Directors may grant to
Messrs. Kostusiak and Lederer.
For the purpose of calculating present values, the discount rates assumed
were the applicable federal rates for the month of June 2000, as required under
Section 280G of the Internal Revenue Code for determinations made as of that
time. Any assumptions regarding cost of living adjustments were considered
reasonable approximations of future expectations based on current market
conditions.
<TABLE>
<CAPTION>
GOLDEN PARACHUTE BENEFIT KARL KOSTUSIAK DAVID LEDERER TOTAL
------------------------ -------------- ------------- ----------
<S> <C> <C> <C>
Cash Severance Payment(1).............................. $1,246,362 $ 577,254 $1,823,616
Cash Payment In Lieu of Benefits(2).................... 80,577 75,033 155,610
Present Value of Noncompete Payment(3)................. 1,057,369 931,306 1,988,675
Present Value of Continued Medical Payment(4).......... 422,400 446,400 868,800
Present Value of Continued Fringe Benefits(5).......... 110,871 115,661 226,532
Present Value of Retirement Benefit(6)................. 1,673,960 608,971 2,282,931
Tax "Gross-Up" Payment(7).............................. 588,853 -- 588,853
---------- ---------- ----------
Total Estimated Payments............................... $5,180,392 $2,754,625 $7,935,017
---------- ---------- ----------
</TABLE>
------------------------
(1) Messrs. Kostusiak and Lederer are entitled to a one time cash severance
payment upon termination equal to three times the highest total cash
compensation (including base salary and bonuses) paid to them in any of their
respective last three fiscal years completed prior to termination.
(2) Messrs. Kostusiak and Lederer are entitled to a cash payment
representing the amounts the Company would expend on "benefits" for a three year
period following termination. The above estimate does not include cash
compensation or options. Our estimated values for Messrs. Kostusiak and Lederer
are $1,000 per month for general health and welfare, $10,000 per year for auto,
and $4,859 per year for Mr. Kostusiak's 401(k) and $3,011 per year for
Mr. Lederer's 401(k).
A-1
<PAGE>
(3) Messrs. Kostusiak and Lederer will be paid annual non-compete fees equal
to or greater than $154,500 and $123,600, respectively, subject to increase each
year if and to the extent the CPI has increased during the preceding year. These
fees will be paid so long as Messrs. Kostusiak and Lederer abide by their
non-compete agreements through the age of 69. A CPI rate of 3% and a discount
rate of 7.87% were assumed in calculating the present value of this benefit.
(4) Messrs. Kostusiak and Lederer and their spouses will continue to receive
medical benefits throughout their lifetimes. The benefit of these medical
payments is estimated at a total of $600 per month for each of Mr. Kostusiak and
his spouse and a total of $600 per month for each of Mr. Lederer and his spouse.
Medical inflation of 6% and a discount rate of 7.87% were assumed in calculating
the present value of this benefit. For purposes of calculation it was assumed
that Messrs. Kostusiak and Lederer, who are 61 and 60 years of age,
respectively, have life expectancies of 85 years. It was assumed that the
executives' spouses have the same ages and life expectancies as their husbands.
(5) Messrs. Kostusiak and Lederer will also be entitled to continue to
receive fringe benefits throughout their lifetimes. From the time of termination
until age 69 the estimated value of this benefit is $10,000 a year for both
Messrs. Kostusiak and Lederer. From age 69 until death, these fringe benefits
are limited to 60% of the pre-retirement levels and are thus estimated at $6,000
per year. A discount rate of 7.87% was assumed in calculating the present value
of these fringe benefits. For purposes of calculation it was assumed that
Messrs. Kostusiak and Lederer, who are 61 and 60 years of age, respectively,
have life expectancies of 85 years. It was assumed that the executives' spouses
have the same ages and life expectancies as their husbands.
(6) Messrs. Kostusiak and Lederer will be entitled to receive retirement
benefits from age 69 until the later of their death or the death of their
respective spouses. This amount is equal to 60% of the base salary for the last
year of their full time employment, increased each year thereafter by any
increase in the CPI, except that the wage benefit for their spouses shall be 75%
of that amount after the executives' deaths. These estimates were calculated
assuming a discount rate of 7.87%. For purposes of calculation it was assumed
that Messrs. Kostusiak and Lederer, who are 61 and 60 years of age,
respectively, have life expectancies of 85 years. It was assumed that the
executives' spouses have the same ages and life expectancies as their husbands.
(7) The Company is obligated to make tax gross-up payments to
Mr. Kostusiak, the net effect of which is to provide additional amounts to
Mr. Kostusiak for the purpose of paying golden parachute excise taxes resulting
from his receipt of the Cash Severance Payment, the Cash Payment In Lieu of
Benefits, and, if applicable, repayment by the Company of loans to
Mr. Kostusiak under his life insurance policy. The gross-up provisions also
require that the gross-up payment include amounts to cover all federal, state,
and local income and excise taxes that Mr. Kostusiak is required to pay by
virtue of receiving the gross-up payment itself. For purposes of calculation,
the tax rates for Mr. Kostusiak were assumed to be 39.2634% for federal income
taxes, 6.85% for New York State income taxes and 1.45% for Medicare taxes. The
applicable federal excise tax of 20% pursuant to Section 280G of the Internal
Revenue Code was also used in the calculation. For purposes of calculation under
Section 280G of the Internal Revenue Code, the Base Amount of Messrs. Kostusiak
and Lederer was assumed to be the average of Messrs. Kostusiak's and Lederer's
annual salary and bonus for the past five years.
A-2
<PAGE>
APPENDIX B
INFORMATION CONCERNING PARTICIPANTS IN THE PROXY SOLICITATION
The following sets forth the name, business address, and the number of
shares of Common Stock of the Company beneficially owned (as determined in
accordance with Rule 13d-3 under the Exchange Act) as of February 10, 2000 by
each of (i) Ultrak and (ii) the Ultrak Nominees:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK OF
THE COMPANY PERCENT OF COMMON
NAME BUSINESS ADDRESS BENEFICIALLY OWNED(1) STOCK OF THE COMPANY(1)
---- ---------------- --------------------- -----------------------
<S> <C> <C> <C>
Ultrak, Inc................ 1301 Water's Ridge Drive 1,335,100 21%
Lewisville, TX 75240
Ronald F. Harnisch......... 1 Tudor City Place 0 *
New York, NY 10017
Robert L. Frome............ Olshan, Grundman, 0 *
Frome, Rosenzweig &
Wolsky, LLP
505 Park Avenue
New York, NY 10022
William D. Breedlove....... Hoak Securities Corp. 0 *
One Galleria Tower
13355 Noel Road
Suite 1650
Dallas, TX 75240
</TABLE>
------------------------
* Less than 1%.
(1) All percentages are based on the 6,364,000 shares of Common Stock
outstanding as of June 2, 2000 according to the Company's report on
Form 10-K filed on June 29, 2000.
------------------------
Except as set forth in this Proxy Statement or in the Appendices hereto, to
the best knowledge of Ultrak, none of Ultrak, any of the persons participating
in this solicitation on behalf of Ultrak, any of the Ultrak Nominees nor any
associate of any of the foregoing persons (i) owns beneficially, directly or
indirectly, or has the right to acquire, any securities of the Company or any
parent or subsidiary of the Company, (ii) owns any securities of the Company of
record but not beneficially, (iii) has purchased or sold any securities of the
Company within the past two years, (iv) has incurred indebtedness for the
purpose of acquiring or holding securities of the Company, (v) is or has been a
party to any contract, arrangement or understanding with respect to any
securities of the Company within the past year, (vi) has been indebted to the
Company or any of its subsidiaries since the beginning of the Company's last
fiscal year or (vii) has any arrangement or understanding with respect to future
employment by the Company or with respect to any future transactions to which
the Company or any of its affiliates will be or may be a party. In addition,
except as set forth in this Proxy Statement or in the Appendices hereto, to the
best knowledge of Ultrak, none of Ultrak, any of the persons participating in
this solicitation on behalf of Ultrak, any of the Ultrak Nominees, nor any
associate of any of the foregoing persons has had or is deemed to have a direct
or indirect material interest in any transaction with the Company since the
beginning of the Company's last fiscal year, or in any proposed transaction, to
which the Company or any of its affiliates was or is a party.
None of the corporations or organizations in which any of the Ultrak
Nominees has conducted his principal occupation or employment was a parent,
subsidiary or other affiliate of the Company, and none of the Ultrak Nominees
holds any position or office with the Company, has any family relationship with
any executive officer or director of the Company or each other, or has been
involved in any legal proceedings of the type required to be disclosed by the
rules governing this solicitation.
B-1
<PAGE>
APPENDIX C
TRANSACTIONS IN SHARES OF DETECTION SYSTEMS, INC.
The following table sets forth information with respect to all purchases and
sales of shares of Common Stock by Ultrak and its associates, affiliates and the
Ultrak Nominees during the past two years:
<TABLE>
<CAPTION>
FOR THE ACCOUNT OF: DATE OF TRANSACTION NATURE OF TRANSACTION NUMBER OF SHARES PRICE PER SHARE
------------------- ------------------- --------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Ultrak, Inc. 6/16/98 Purchase 3,000 $9.31
6/18/98 Purchase 22,800 9.31
6/29/98 Purchase 3,000 9.06
6/30/98 Purchase 7,000 9.06
6/30/98 Purchase 3,000 8.94
7/10/98 Purchase 5,000 9.06
7/13/98 Purchase 21,000 9.06
7/14/98 Purchase 2,000 9.06
7/21/98 Purchase 4,000 9.06
7/22/98 Purchase 5,000 9.06
7/24/98 Purchase 2,500 8.81
7/28/98 Purchase 4,500 8.81
7/31/98 Purchase 5,500 8.81
8/3/98 Purchase 2,000 8.81
8/4/98 Purchase 14,500 8.81
8/5/98 Purchase 11,000 8.81
8/6/98 Purchase 5,000 8.81
8/7/98 Purchase 5,000 8.81
8/10/98 Purchase 8,000 8.56
8/11/98 Purchase 7,000 8.51
8/18/98 Purchase 1,000 8.81
8/19/98 Purchase 7,000 8.81
8/20/98 Purchase 9,000 8.81
8/21/98 Purchase 50,000 8.69
8/24/98 Purchase 3,000 8.81
8/24/98 Purchase 1,000 8.81
8/25/98 Purchase 5,000 8.94
8/25/98 Purchase 24,000 8.94
8/25/98 Purchase 3,941 8.94
8/26/98 Purchase 2,000 8.94
8/27/98 Purchase 10,000 8.94
8/28/98 Purchase 44,500 8.94
8/28/98 Purchase 77,000 9.06
8/31/98 Purchase 8,000 8.94
9/1/98 Purchase 5,000 8.94
9/1/98 Purchase 23,000 8.87
9/1/98 Purchase 2,000 8.81
9/2/98 Purchase 15,000 8.75
9/3/98 Purchase 15,000 8.75
9/3/98 Purchase 6,500 8.69
9/4/98 Purchase 4,000 8.75
9/9/98 Purchase 2,000 8.50
9/11/98 Purchase 2,000 8.50
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
FOR THE ACCOUNT OF: DATE OF TRANSACTION NATURE OF TRANSACTION NUMBER OF SHARES PRICE PER SHARE
------------------- ------------------- --------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
9/14/98 Purchase 6,000 8.50
9/15/98 Purchase 1,059 8.50
9/16/98 Purchase 9,000 $8.63
9/17/98 Purchase 21,000 8.75
9/21/98 Purchase 2,500 8.63
9/25/98 Purchase 5,000 9.13
10/7/98 Purchase 130,000 9.63
10/8/98 Purchase 1,500 9.13
10/9/98 Purchase 10,000 9.13
10/12/98 Purchase 5,000 9.35
10/13/98 Purchase 2,000 9.50
10/14/98 Purchase 5,000 9.75
10/16/98 Purchase 10,000 9.50
10/19/98 Purchase 2,000 9.50
10/19/98 Purchase 4,000 9.63
10/20/98 Purchase 30,000 9.50
10/22/98 Purchase 6,000 9.50
10/28/98 Purchase 4,500 10.00
10/30/98 Purchase 3,000 10.00
11/2/98 Purchase 5,000 10.00
1/7/99 Purchase 2,000 8.88
1/8/99 Purchase 2,000 9.13
1/11/99 Purchase 5,000 9.48
1/12/99 Purchase 3,000 9.83
1/13/99 Purchase 3,000 9.67
1/14/99 Purchase 5,000 9.38
1/19/99 Purchase 10,000 9.69
1/21/99 Purchase 3,000 9.75
1/26/99 Purchase 5,000 9.75
4/8/99 Purchase 2,000 7.25
4/13/99 Purchase 4,000 7.06
4/14/99 Purchase 2,000 7.38
4/14/99 Purchase 2,000 7.38
4/14/99 Purchase 2,000 7.50
4/14/99 Purchase 2,000 7.38
5/21/99 Purchase 1,500 8.50
5/21/00 Purchase 1,500 8.50
5/21/00 Purchase 1,500 8.50
5/21/00 Purchase 1,500 8.50
5/21/00 Purchase 1,500 8.50
5/24/99 Purchase 1,500 8.50
6/3/99 Purchase 1,000 8.50
6/4/99 Purchase 6,000 8.50
5/19/00 Purchase 100 10.13
</TABLE>
C-2
<PAGE>
APPENDIX D
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, to the knowledge of Ultrak based on a review
of publicly available information filed with the SEC, each person (other than
directors, whose beneficial ownership is in the table on the following page)
reported to own beneficially more than 5% of the outstanding Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP OF
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK PERCENT OF CLASS(1)
------------------------------------ ------------------------------- -------------------
<S> <C> <C>
Ultrak, Inc........................................ 1,335,100 21.0%
1301 Water's Ridge Drive
Lewisville, TX 75240
Dimensional Fund Advisors Inc...................... 388,872(2) 6.1%(2)
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
USGM Securities, Inc............................... 334,371(3) 5.3%(3)
94 Cedar Street
P.O. Box 1424
Corning, NY 14830
</TABLE>
------------------------
(1) Based upon the 6,364,000 shares of Common Stock outstanding as of June 2,
2000 according to Company's report on Form 10-K filed on June 29, 2000.
(2) Information obtained from Schedule 13G filed on February 3, 2000.
(3) Information obtained from Schedule 13G filed on February 8, 2000.
D-1
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of June 7, 1999 with respect
to the beneficial ownership of shares of Common Stock by each of the Company's
directors and executive officers and all directors and executive officers as a
group:(1)
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP(2) COMMON STOCK
---- ----------------------- ------------
<S> <C> <C>
Directors (Other than Executive Officers)
Donald R. Adair................................. 1,549(3) *
Mortimer B. Fuller, III......................... 3,645 *
Edward C. McIrvine.............................. 7,500 *
Executive Officers
George E. Behlke................................ 53,683(4)(5) *
Karl H. Kostusiak............................... 571,761(4)(5) 8.8%
David B. Lederer................................ 324,502(4)(5) 5.0%
Frank J. Ryan................................... 75,276(4)(5)(6) 1.2%
Lawrence R. Tracy............................... 133,473 2.1%
All directors and executive officers as a group
including persons named above (9 persons)......... 1,175,640(3)-(6) 18.5%
</TABLE>
------------------------
* Less than 1 percent.
(1) All such information was obtained from the Company Proxy Statement.
(2) For all shares listed, each person possesses both sole voting and investment
power, except for those shares listed in notes (3) through (6) below.
(3) Includes 1,173 shares held in custodianship for Mr. Adair's children under
the Uniform Gifts to Minors Act of New York for which Mr. Adair disclaims
beneficial ownership.
(4) Includes 16,790, 8,000, 4,000, 5,664, 76,865 and 117,219 shares which may be
acquired upon exercise of warrants and options held by Messrs. Behlke,
Kostusiak, Lederer, Ryan, Tracy and all directors and executive officers as
a group, respectively.
(5) Includes 9,234, 179,840, 117,465, 8,492, 6,488 and 321,519 hypothetical
shares credited to the accounts of Messrs. Behlke, Kostusiak, Lederer, Ryan,
Tracy and all directors and executive officers as a group, respectively,
pursuant to the Company's deferred compensation plans, which shares may be
acquired by them upon retirement.
(6) Includes 810 shares held in trust for Mr. Ryan's son under the Uniform Gifts
to Minors Act of New York for which Mr. Ryan disclaims beneficial ownership.
D-2
<PAGE>
DETECTION SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF ULTRAK, INC.
The undersigned stockholder of Detection Systems, Inc. (the "Company") hereby
appoints George K. Broady and Mark L. Weintrub, and each of them, with several
powers of substitution, as proxies to cast all votes which the undersigned
stockholder is entitled to cast at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at [date, time, location], and at any adjournments
or postponements thereof. The undersigned stockholder hereby revokes any proxy
or proxies heretofore given.
This proxy will be voted as directed by the undersigned stockholder. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE
NOMINEES LISTED IN PROPOSAL 1 AND IN ACCORDANCE WITH THE DETERMINATION OF THE
PROXY HOLDERS AS TO OTHER MATTERS. The undersigned stockholder hereby
acknowledges receipt of the Ultrak Proxy Statement.
The undersigned stockholder may revoke this proxy at any time prior to its
exercise by filing a written notice of revocation with, or by delivering a duly
executed proxy bearing a later date to, the Secretary of the Company or by
attending the Annual Meeting of Stockholders.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign exactly as your name(s) appear(s) on the books of the Company. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
For All With For All
/X/ PLEASE MARK 1. Election of Directors Nominees hold Except
VOTED AS IN Ronald F. Harnisch
THIS EXAMPLE Robert L. Frome / / / / / /
DETECTION SYSTEMS, INC William D. Breedlove
IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A
PARTICULAR NOMINEE, MARK THE "FOR ALL EXCEPT" BOX AND
STRIKE A LINE THROUGH THE NAME(S) OF THE NOMINEE(S).
YOUR SHARES WILL BE VOTED FOR THE REMAINING
NOMINEE(S).
To transact such other business as may properly come
before the meeting or any adjournment thereof.
The undersigned stockholder(s) authorize(s) the
proxies to vote on the above matter as indicated and
to vote, in their discretion, upon such other matters
as may properly come before the Annual Meeting or any
adjournments or postponements thereof.
----------------------------------------------------------------------------------------------------
Stockholder sign here Co-owner sign here
----------------------------------------------------------------------------------------------------
Dated Dated
</TABLE>
