SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
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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 6, 2000
Dear Fellow Detection Systems Shareholder:
The delayed 2000 Annual Meeting of Shareholders is now scheduled for
December 19, 2000, at 2:00 p.m., Eastern Time, at Detection Systems' offices,
130 Perinton Parkway, Fairport, New York. This year's election of directors is
likely to determine the future of Detection Systems and the future of our
investments as shareholders.
Enclosed you will find a BLUE proxy card which will allow you to vote for
Ultrak's nominees at the Annual Meeting. In addition, we enclose copies of our
August 15, 2000 proxy statement and our subsequent letters to Detection Systems'
shareholders.
WHAT WE STAND FOR
Ultrak owns 21% of the Detection Systems common stock, and for more than a
year has been encouraging Detection Systems' management to sell the Company. As
part of this effort, Ultrak initiated discussions between Detection Systems and
Robert Bosch, GmbH, a $30 billion global company.
On September 23, 2000, Bosch made a written proposal to acquire Detection
Systems for $14 per share in cash. The proposal contemplated that Bosch would be
permitted to complete its due diligence with the Company's cooperation and held
out the possibility that the purchase price might be increased.
Unfortunately, Detection Systems' incumbent management rejected this offer
without even trying to convince Bosch to increase its price. If elected, the
Ultrak Nominees will pursue and seek to improve the Bosch offer, and will also
pursue a sale of the Company to any other bidder who will pay more than Bosch.
MANAGEMENT'S MIXED SIGNALS
Last June, after being notified that Ultrak would seek to elect directors
committed to a sale of the Company, management delayed the 2000 Annual Meeting
in order "to more fully explore the Company's strategic alternatives for
resolving this proxy contest."
In September, a "strategic alternative" fell into management's lap --
Bosch offered to purchase the Company for $14 per share in cash, a 51% premium
over the prior day's closing price. Two weeks later, however, management
rejected Bosch's offer, without even trying to improve it. Instead, shareholders
were told of Detection System's "bright future due to
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investments and business opportunities." If management were really prepared to
sell the Company, and if management strongly believes in the Company's "bright
future," perhaps it could have tried to convince Bosch to raise its offer.
Then, just days ago, management announced its decision "to enter into
discussions with a limited number of parties regarding their strategic interest
in the Company, which may include a joint venture arrangement, licensing
agreement, minority investment or potential sale of the Company." A limited
number of parties. Maybe this, maybe that. Discussions, but no commitment. What
will management say and do if it wins this proxy contest?
MANAGEMENT'S SCARE TACTICS
Management has argued to shareholders that it is dangerous to elect the
Ultrak Nominees for two principal reasons:
o Management claims that the Ultrak Nominees have no industry
experience and were handpicked by Ultrak and therefore might give
significant consideration to Ultrak's opinions, and
o Management claims that the Ultrak Nominees would have the power to
fire the Company's experienced management team and replace it with
Ultrak personnel.
Management is forced to concede, however, that the Ultrak Nominees have
fiduciary duties under New York law that require them to act in the best
interests of all Detection Systems shareholders.
The three Ultrak Nominees -- Ronald F. Harnisch, Robert L. Frome and
William D. Breedlove -- are lawyers and an investment banker. Ultrak did not
select them for their ability to run Detection Systems' day-to-day business, but
rather because it believes these professionals are fully capable of managing a
sale of the Company while also ensuring that the Company is managed by senior
officers with appropriate industry experience. The Ultrak Nominees have informed
Ultrak that they do not intend to seek or even encourage the resignation of
Detection Systems' management pending a sale of the Company, but rather would
prefer to work with existing management to fulfill a shareholder mandate to sell
the Company if they are elected. Should members of the Company's current
management decide they are unable or unwilling to continue in their current
officer positions, the Ultrak Nominees will immediately seek to replace any such
management member with an industry executive not affiliated with Ultrak.
ULTRAK SEEKS TO BRING DIRECT BENEFITS TO ALL SHAREHOLDERS
Detection Systems has approved, year-in and year-out, golden parachute
agreements providing its top two officers (who also happen to be two of the
Company's five directors) with benefits that Ultrak has criticized as
disproportionate in relation to the size of the Company. Because we believed
these golden parachutes were so egregious, Ultrak filed a federal lawsuit, for
the benefit of all Detection Systems shareholders, to invalidate them.
Less than 24 hours before the federal court was to hear a motion in
Ultrak's lawsuit, Detection Systems announced that the golden parachute
agreements had been amended and
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asked the court to declare the lawsuit moot. Because its goal had been
substantially achieved, Ultrak voluntarily withdrew the lawsuit with the
approval of the court.
Based on the share price on the day before the golden parachutes were
amended and based on calculations described at length in Ultrak's August 15,
2000 proxy statement (a copy of which is included with this mailing), the
change-in-control benefits to these two directors were very substantially
reduced:
Old Golden Revised Golden
Parachute Agreements Parachute Agreements
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Potential Golden Parachute
Payments $7.9 million $2.9 million
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Payments as a % of
Company Market Value 13.8% 5.0%
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Potential Savings to
Shareholders -- $5.0 million
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The $5 million in potential savings may be very significant to Detection Systems
shareholders. If the Company is sold, Ultrak believes this $5 million would be
reflected in the purchase price received by shareholders, rather than paid over
to the Company's two most highly paid executives.
TIME IS SHORT
Last July, Detection Systems announced that the 2000 Annual Meeting would
be delayed because management was talking with financial advisors "to more fully
explore the Company's strategic alternatives for resolving this proxy contest."
In September, after being told that Ultrak would act under New York law to call
a meeting if Detection Systems failed to do so, Detection Systems set a meeting
date of December 19, 2000, and a record date of December 1, 2000, for the 2000
Annual Meeting of Shareholders. For some unexplained reason, management has seen
fit to allow only an 18-day solicitation period between the record and meeting
dates they've chosen this year. (For the last 5 annual meetings, Detection
Systems has set solicitation periods ranging from 38 days to 49 days, and last
year's meeting had a 43-day solicitation period.)
We are soliciting proxies now, before the record date, as a result of
management's highly unusual action in setting the record and meeting dates.
(Management, too, now says it intends to solicit proxies in advance of the
record date it chose.) You can vote your shares now, and your vote will count,
so long as (and to the extent) you are a holder of shares on the record date. In
order to ensure that you do not lose your ability to vote as a result of
management's highly unusual action, we urge you to vote now, rather than waiting
until after the record date to do so.
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WE NEED YOUR VOTE!
Ultrak was able on its own to bring a lawsuit, for the benefit of all
Detection Systems shareholders, challenging management's golden parachute
agreements, but we do need your support in order to elect directors who are
committed to maximizing shareholder value through a sale of the Company. If
elected, our nominees will cause the Detection Systems board of directors to
retain an investment banking firm, which would be charged with implementing a
sale of the Company -- either to Bosch or another buyer.
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WE URGE YOU TO VOTE NOW FOR THE ULTRAK NOMINEES BY SIGNING AND DATING THE
ENCLOSED BLUE PROXY CARD AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
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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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November 6, 2000
ULTRAK, INC.
IMPORTANT INVITATION
As the Annual Meeting of Detection Systems, Inc. stockholders approaches, you
will be presented with an important opportunity to help determine the value of
your investment.
With this in mind, we are aware that the information you have received over the
last several weeks concerning the upcoming proxy contest is a great deal to
absorb.
As the largest shareholder of Detection Systems, we would like to give you the
opportunity to meet face-to-face with us so that we can address any questions or
concerns you may have.
You are invited to attend a meeting sponsored by Ultrak on Tuesday, November 14
at the Holiday Inn Rochester South/Holidome, 111 Jefferson Road, Rochester, NY
from 5 p.m. to 6 p.m.
We believe these meetings will provide you with the facts that will help you to
make an informed decision.
If you are interested in attending or learning more about the meetings, please
call us at 1-800-223-2064.
We look forward to meeting with you at:
Holiday Inn Rochester South/Holidome
111 Jefferson Road
Rochester, NY 14623
(716) 475-1510
Sincerely,
George K. Broady
Chairman of the Board and Chief Executive Officer
Ultrak, Inc.
