SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Detection Systems, Inc.
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(Name of Registrant as Specified In Its Charter)
Ultrak, Inc.
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[Ultrak Letterhead]
November 28, 2000
Dear Fellow Detection Systems Shareholder:
By now you may have received management's proxy materials and proxy card
for the upcoming Annual Meeting of Shareholders. Unbelievably, those materials
suggest that you vote for management's nominees because Ultrak may influence its
nominees to sell the Company for too little or allow Ultrak to buy the Company
three years from now. Management also suggests that Ultrak may trick its
nominees into doing something that benefits Ultrak and harms Detection Systems.
None of that is true, and we believe management is using these fabrications to
hide from the real issue in this proxy contest.
Here's why you should ignore management's scare tactics and vote the
enclosed BLUE proxy card in favor of the Ultrak Nominees.
THE REAL ISSUE IS WHETHER THE COMPANY WILL BE SOLD
Ultrak is seeking to elect nominees to the Detection Systems board of
directors because Ultrak believes that the Company should be sold. The Ultrak
Nominees are firmly committed to a prompt sale of the Company.
Management, on the other hand, recently rejected a $14 per share cash
offer from Robert Bosch, GmbH, a $30 billion global company. Management has said
that Bosch's offer does not represent a fair value for the Company. Although
management says they considered various analyses by their investment banking
firm, Fleet Securities, Inc., management did not ask Fleet for the customary
fairness opinion on the Bosch offer. Very interesting!
Amazingly, despite their rejection of the Bosch offer, management has the
gall to point to their past dealings with Bosch as evidence that they are
willing to sell the Company at the right price.
IT'S ALL ABOUT PRICE, OR SO THEY SAY
It's hard to understand why management -- if they truly are willing to
sell the Company at the right price -- rejected Bosch's offer without trying to
increase the $14 per share price. Management, after all, claims that the Company
is worth more, and Bosch's letter making its $14 per share offer did hold out
the possibility that the purchase price might be increased.
In the light of management's rejection of the Bosch offer without any
attempt to negotiate, we question management's motives and wonder about their
agenda.
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ULTRAK'S POSITION ON THE BOSCH OFFER
Based on publicly available information about the Company, Ultrak believes
that Bosch's $14 per share cash offer is a fair and reasonable price. According
to management, which has the benefit of information that is not public, the
Company is worth substantially more. If this proves to be the case, Ultrak would
not support a sale of the Company at $14 per share and would instead encourage
the Ultrak Nominees, if they are elected, to negotiate a price that reflects the
additional value. If the Company's confidential information does not validate a
higher price, Ultrak would support a sale of the Company at $14 per share in
cash.
MORE SCARE TACTICS
At a public meeting in Rochester, New York, I was asked whether the Ultrak
Nominees would sell the Company for a little as $8 per share if that were the
highest price immediately available. Given the very hypothetical nature of the
question due to Bosch's $14 per share offer, I responded that the decision would
be up to the Ultrak Nominees.
Management is now trying to twist that exchange to suggest that Ultrak
would support a sale of Detection Systems at a price as little as $8 per share.
To be clear, unless management is hiding a catastrophe not revealed in the
Company's public filings, I would not support a sale of the Company at $8 per
share.
THE FUTURE OF THE COMPANY'S BOARD OF DIRECTORS
If the Ultrak Nominees are elected, the Company's board of directors will
consist of the three Ultrak Nominees and two members of the current board of
directors. A majority of the board will therefore support a prompt sale of the
Company.
We have heard from other large shareholders who are seeking to increase
shareholder value, including Duncan Soukup, President and CEO of Lionheart
Group, Inc., which holds 5.2% of Detection Systems' common stock. Although Mr.
Soukup has held discussions with management and management has announced its
intention, if all five of its nominees are elected, to add Mr. Soukup to the
board, the Ultrak Nominees believe that, in light of his active interest in
increasing shareholder value, Mr. Soukup would make a positive contribution to
the board of directors if the Ultrak Nominees are elected. As a result, the
Ultrak Nominees also intend to invite Mr. Soukup to join the Company's board of
directors if they are elected and if Mr. Soukup confirms he will support a sale
of the Company for at least $14 per share.
TIME IS RUNNING SHORT
The Annual Meeting is scheduled for December 19, and management has set
December 1 as the record date. This leaves very little time for the solicitation
of proxies between the record date and the meeting date and means, in fact, that
mailings after the record date may not even reach all shareholders in time to
have their votes counted.
If you believe that a sale of the Company is the best way to increase
shareholder value and want to elect directors who are committed to that goal, we
urge you to vote now
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<PAGE>
for the Ultrak Nominees by signing and dating the enclosed BLUE proxy card and
returning it in the enclosed postage-paid envelope.
Please do not vote management's white proxy card even as a protest vote
against management. If you have already voted management's white proxy card, you
can revoke that vote by signing and dating the enclosed BLUE proxy card
solicited by Ultrak.
In closing, I am reminded once again by Ultrak's lawyers that I must let
you know that there can be no assurance that Ultrak's nominees, if they are
elected, will be able to cause a sale of the Company or, if they do cause a sale
of the Company, as to the price at which the Company may be sold. Nonetheless,
rest assured that the Ultrak Nominees are committed to doing their level best to
sell Detection Systems as quickly as practicable.
Sincerely yours,
George K. Broady
Chairman of the Board and Chief Executive Officer
Ultrak, Inc.
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If you have any questions about the upcoming election of directors or Ultrak's
goals in supporting the Ultrak Nominees, I encourage you to call me at (972)
353-6650 or to email me at [email protected] with a number where you may
be reached.
You may also contact our proxy firm, Georgeson Shareholder Communications Inc.,
at (800) 223-2064.
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