<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 sec. 240.14a-11(c) or sec. 240.14a-12
ULTRAK, INC. (Name of Registrant as Specified in its Charter)
-----------------
(Name of Person(s) Filing Proxy Statement, if other than
----------------- the Registrant)
Payment of Filing Fee (Check the appropriate box): [X] No fee
required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
------------
(2) Aggregate number of securities to which transaction applies:
14,502,868
----------
(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): N/A
---
(4) Proposed maximum aggregate value of transaction: N/A
---
(5) Total fee paid: N/A
---
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
----------------------------------------------[ULTRAK PICTURE]
<PAGE> 2
ULTRAK, INC.
1301 WATERS RIDGE DRIVE
LEWISVILLE, TEXAS 75057
April 24, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
(the "Meeting") of Ultrak, Inc. (the "Company") to be held at Ultrak's Worldwide
Support Center, 1301 Waters Ridge Drive, Lewisville, Texas 75057 at 9:00 a.m.,
central daylight time, on Friday, May 29, 1998.
The attached Notice of Annual Meeting and Proxy Statement fully
describe the formal business to be transacted at the Meeting, which includes the
election of six directors and the approval of independent certified public
accountants of the Company.
Directors and officers of the Company will be present to help host the
Meeting and to respond to any questions that our shareholders may have. I hope
you will be able to attend.
The Company's Board of Directors believes that a favorable vote for
each person nominated to serve as a director of the Company and for approval of
Grant Thornton LLP as the firm of independent certified public accountants to
audit the accounts of the Company for the fiscal year ending December 31, 1998,
are in the best interests of the Company and its shareholders and unanimously
recommends a vote "FOR" each such director and "FOR" approval of Grant Thornton
LLP as the Company's independent certified public accountants. Accordingly, we
urge you to review the accompanying material carefully and to return the
enclosed Proxy promptly.
Please sign, date and return the enclosed Proxy without delay. If you
attend the Meeting, you may vote in person even if you have previously mailed a
Proxy.
Sincerely,
/s/ GEORGE K. BROADY
George K. Broady
Chairman of the Board
2
<PAGE> 3
ULTRAK, INC.
1301 WATERS RIDGE DRIVE
LEWISVILLE, TEXAS 75057
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 29, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of Ultrak, Inc. (the "Company" or "Ultrak") will be held at 1301
Waters Ridge Drive, Lewisville, Texas 75057 on Friday, May 29, 1998 at 9:00
a.m., central daylight time, for the following purposes:
(1) to elect six directors to serve until the next Annual Meeting of
Shareholders or until their respective successors are elected and qualified;
(2) to consider and act upon a proposal to approve the selection by the Board of
Directors of Grant Thornton LLP as the firm of independent certified public
accountants to audit the accounts of the Company for the fiscal year ending
December 31, 1998; and
(3) to transact such other business as may properly come before the Meeting or
any adjournment thereof.
The close of business on March 31, 1998 has been fixed as the record
date for determining shareholders entitled to notice of and to vote at the
Meeting or any adjournment thereof. For a period of at least ten days prior to
the Meeting, a complete list of shareholders entitled to vote at the Meeting
shall be open to the examination of any shareholder during ordinary business
hours at the offices of the Company at 1301 Waters Ridge Drive, Lewisville,
Texas 75057.
Information concerning the matters to be acted upon at the Meeting is
set forth in the accompanying Proxy Statement.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING IN PERSON
ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
/s/ TIM D. TORNO
Tim D. Torno
Secretary
Lewisville, Texas
April 24, 1998
3
<PAGE> 4
ULTRAK, INC.
1301 WATERS RIDGE DRIVE
LEWISVILLE, TEXAS 75057
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 29, 1998
This Proxy Statement is being first mailed on or about April 24, 1998
to shareholders of Ultrak, Inc., a Delaware corporation (the "Company" or
"Ultrak"), by the Board of Directors to solicit proxies (the "Proxies") for use
at the Annual Meeting of Shareholders (the "Meeting") to be held at 1301 Waters
Ridge Drive, Lewisville, Texas 75057 on Friday, May 29, 1998, at 9:00 a.m.,
central daylight time, or at such other time and place to which the Meeting may
be adjourned.
The purpose of the Meeting is to consider and act upon (i) the election
of six directors; (ii) the approval of independent certified public accountants;
and (iii) such other matters as may properly come before the Meeting or any
adjournment thereof.
All shares represented by valid Proxies, unless the shareholder
otherwise specifies, will be voted (i) FOR the election of the six persons named
under "Election of Directors" as nominees for election as directors of the
Company; (ii) FOR the approval of Grant Thornton LLP as the firm of independent
certified public accountants to audit the accounts of the Company for the fiscal
year ending December 31, 1998; and (iii) at the discretion of the Proxy holders
with regard to any other matters that may properly come before the Meeting or
any adjournment thereof. Where a shareholder has appropriately specified how a
Proxy is to be voted, it will be voted accordingly.
The Proxy may be revoked at any time by providing written notice of
such revocation to the person named as proxy, by voting in person at the Meeting
or by giving a later Proxy.
RECORD DATE AND VOTING SECURITIES
The record date for determining the shareholders entitled to vote at
the Meeting was the close of business on March 31, 1998 (the "Record Date"), at
which time the Company had issued and outstanding 14,502,868 shares of Common
Stock, $0.01 par value ("Common Stock"), and 195,351 shares of Series A 12%
Cumulative Convertible Preferred Stock, $5.00 par value ("Series A Preferred
Stock") (the Common Stock and the Series A Preferred Stock are sometimes
collectively referred to herein as the "Voting Shares"). The Voting Shares
constitute the only outstanding voting securities of the Company entitled to be
voted at the Meeting.
QUORUM AND VOTING
The presence, in person or by Proxy, of the holders of Voting Shares
holding a majority of the votes entitled to be cast is necessary to constitute a
quorum at the Meeting. Each holder of shares of Common Stock is entitled to one
vote per share of Common Stock and each holder of shares of Series A Preferred
Stock is entitled to 16.667 votes per share of Series A Preferred Stock with
respect to each matter (including the election of directors) to be voted on at
the Meeting. Assuming the presence of a quorum, the affirmative vote equal to at
least a majority of the votes cast at the Meeting, in person or by Proxy, is
required for the election of directors and approval of independent certified
public accountants. Abstentions will be included in vote totals and, as such,
will have the same effect as a negative vote. Where nominee recordholders do not
vote on specific issues because they did not receive specific instructions on
such proposal from the beneficial owners of such shares ("broker nonvotes"),
such broker nonvotes will not be included in vote totals and, as such, will not
be considered as votes cast.
4
<PAGE> 5
ELECTION OF DIRECTORS
There are six directors to be elected for terms expiring at the
Company's Annual Meeting of Shareholders in 1999 or until their respective
successors are elected and qualified. The persons nominated for election as
directors are listed below. Each of the nominees has indicated his willingness
to serve as a member of the Board of Directors if elected; however, in case any
nominee shall become unavailable for election to the Board of Directors for any
reason not presently known or contemplated, the Proxy holders will have
discretionary authority in that instance to vote the Proxy for a substitute.
George K. Broady, age 59, became Chairman of the Board, President and
Chief Executive Officer of the Company in March 1991, until August 1997 when the
Presidency was awarded to James D. Pritchett. From 1988 to 1991, Mr. Broady was
the President and owner of Geneva Merchant Bankers of Dallas, Texas. Prior to
1988, Mr. Broady was Chairman and Chief Executive Officer of Network Security
Corporation, a company that he founded in 1970. Mr. Broady received his Bachelor
of Science degree (cum laude) from Iowa State University in 1960.
James D. Pritchett, age 51, became President of the Company in August
1997 and became a Director of the Company in August 1989. Mr. Pritchett held the
position of Executive Vice President of the Company from October 1991 to August
1997. Mr. Pritchett joined the Company in September 1988 as Chief Operating
Officer. Prior to joining the Company, Mr. Pritchett was Executive Vice
President and Chief Operating Officer of Booth, Inc., a manufacturer of
electronic equipment from October 1980 to September 1988. Mr. Pritchett received
his Bachelor of Science degree in Mechanical Engineering from the University of
Texas at Arlington in 1969, and his Masters of Science degree in Mechanical
Engineering in 1972 from Southern Methodist University.
William C. Lee, age 58, became a Director of the Company in May 1994.
Mr. Lee has been the Chief Financial Officer of the Annuity Board of the
Southern Baptist Convention, a pension and insurance management company, since
July 1991. Mr. Lee served as a Managing Director of Geneva Merchant Bankers of
Dallas, Texas from 1989 until 1991. Mr. Lee earned his Bachelor of Business
Administration degree from Texas A & M University in 1962 and his Masters of
Business Administration degree from Southern Methodist University in 1966 and is
a Certified Public Accountant.
Charles C. Neal, age 39, became a Director of the Company in May 1994.
Mr. Neal has been President of Chas. A. Neal & Company of Miami, Oklahoma, a
company which owns interests in oil and gas properties and in various
corporations in several industries, including banking, since 1989. From 1985 to
1989, Mr. Neal was with Merrill Lynch & Co. Mr. Neal received his Bachelor of
Arts degree in Economics from the University of Oklahoma in 1981 and a Juris
Doctor/Masters of Business Administration degree from the University of Chicago
Law School and Graduate School of Business in 1985.
Robert F. Sexton, age 63, became a Director of the Company in May 1995.
Mr. Sexton has been President of Bakery Associates, Inc., a company which
brokers bakery packaging goods, since 1983. From 1973 to 1983, Mr. Sexton was
Executive Vice President and a director of Campbell Taggart, Inc., a baking
company. Mr. Sexton is also a director of Republic Group, Inc., a New York Stock
Exchange-listed manufacturer and distributor of paperboard. Mr. Sexton earned
his Bachelor of Business Administration degree in Industrial Management in 1956
from the University of Texas.
Roland Scetbon, age 52, became a Director of the Company in September
1996. Mr. Scetbon is the President of Groupe Bisset, S.A. ("Bisset"), a
subsidiary of the Company based in Paris, France. Mr. Scetbon was one of the two
principal owners of Bisset and has served as President and Managing Director of
Bisset since the Company purchased it in September 1996. Prior to that time, Mr.
Scetbon had been associated with Bisset since 1966. Mr. Scetbon's election as a
Director of the Company was in conjunction with the Company's acquisition of
Bisset.
5
<PAGE> 6
BOARD OF DIRECTORS AND COMMITTEES
The Company has an Audit Committee and a Compensation Committee to
assist the Board of Directors.
The Audit Committee, composed of Messrs. Lee, Neal and Sexton, with Mr.
Lee serving as Chairman, is responsible for (i) reviewing the scope of, and the
fees for, the annual audit of the Company, (ii) reviewing with the independent
auditors the Company's corporate accounting practices and policies, (iii)
reviewing with the independent auditors their final report, (iv) reviewing with
the independent auditors overall accounting and financial controls, and (v)
being available to the independent auditors during the year for consultation
purposes. The Audit Committee met twice in 1997.
The Compensation Committee, composed of Messrs. Lee, Neal and Sexton,
with Mr. Neal serving as Chairman, is responsible for determining the nature and
amount of compensation for the executive officers of the Company, and for
granting stock options under the Company's stock option plans. The Compensation
Committee met three times in 1997.
During 1997, there were four regular meetings and ten special meetings
of the Board of Directors, and all directors of the Company attended at least
75% of all meetings of the Board of Directors and each of the committees on
which they served.
6
<PAGE> 7
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ ----- ----------------------------------------------
<S> <C> <C>
George K. Broady........ 59 Officer Chairman of the Board and Chief Executive
James D. Pritchett...... 51 President and Director
Theodore J. Wlazlowski.. 44 Executive Vice President
Tim D. Torno............ 41 Vice President-Finance, Secretary,
Treasurer and Chief Financial Officer
</TABLE>
- --------------------------
See "Election of Directors" for business experience information concerning
Messrs. Broady and Pritchett.
Theodore J. Wlazlowski joined the Company as Executive Vice President
in January 1998. Prior to his employment by Ultrak, Inc., Mr. Wlazlowski was
the Senior Vice President of Business Development for Siebe Environmental
Controls Corporation from August 1990 to January 1998. From December 1988 to
August 1990, Mr. Wlazlowski was the Executive Vice President of Solidyne,
Inc. Mr. Wlazlowski received a Bachelor of Science Degree from Seton Hall
University in 1976.
Tim D. Torno has been the Vice President-Finance, Secretary, Treasurer
and Chief Financial Officer of the Company since August 1988. From May 1980 to
August 1988, Mr. Torno was employed by KPMG Peat Marwick in Denver, New York and
Corpus Christi, Texas, in various capacities, including senior manager. Mr.
Torno received a Bachelor of Business Administration degree in Accounting (cum
laude) from Texas A & M University in 1979 and a Masters of Business
Administration degree (with honors) in 1993 from the University of Phoenix in
Denver, Colorado and is a Certified Public Accountant.
7
<PAGE> 8
EXECUTIVE COMPENSATION
The following summary sets forth all annual and long-term compensation
paid or accrued to the Company's Chief Executive Officer and each of the
Company's executive officers earning in excess of $100,000 during 1997 for
services rendered to the Company during the fiscal years ended December 31,
1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------- ----------------
AWARDS
----------------
SECURITIES
NAME AND UNDERLYING
PRINCIPAL OPTIONS/ ALL OTHER
POSITION YEAR SALARY BONUS SARS(1) COMPENSATION(2)
- ------------------------------ ---- -------- -------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
George K. Broady, 1997 $357,286 -- 20,795 $2,522
Chief Executive
Officer 1996 $289,440 $237,067 10,000 $2,286
1995 $268,000 -- 50,000 $2,179
James D. Pritchett, 1997 $265,725 -- 35,596 $4,700
President
1996 $213,864 $175,146 -- $3,800
1995 $198,000 -- 37,500 $3,657
Tim D. Torno, 1997 $176,656 -- 9,704 $2,842
Vice President-
Finance, 1996 $149,040 $122,072 -- $2,327
Secretary and
Treasurer 1995 $138,000 -- 18,750 $2,296
</TABLE>
- ------------------------------
(1) SARs are defined as stock appreciation rights.
(2) Company's contribution to employee's 401(k).
8
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
The table below shows information on grants of stock options to the
Named Officers under the 1988 and 1997 Option Plans, during the fiscal year
ended December 31, 1997, which options are reflected in the Summary Compensation
Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
--------------------------------------------------------- -----------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING GRANTED TO EXERCISE PRICE ON
OPTIONS EMPLOYEES IN PRICE DATE OF EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SHARE) GRANT DATE 5% 10%
---- ----------- ------------ ---------- ----------- ----------- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
George K. Broady ........ 20,795(a) 5.6% $ 17.125 $ 17.125 04/01/2007 $224,352 $566,222
James D. Pritchett ...... 15,596(a) 4.2% $ 17.125 $ 17.125 04/01/2007 $168,261 $424,660
20,000(b) 5.4% 9.560 9.560 08/04/2007 120,456 304,008
--------- --- -------- --------
35,596 9.6% $288,717 $728,668
--------- --- -------- --------
Tim D. Torno ............ 9.704(a) 2.6% $ 17.125 $ 17.125 04/01/2007 $104,694 $264,228
</TABLE>
- ------------------------------
(a) Options granted under the 1997 Option Plan. Options vest in one-fifth
increments over a five-year period.
(b) Options granted under the 1988 Option Plan. Options vest in one-fifth
increments over a five-year period.
9
<PAGE> 10
STOCK OPTION PLANS
The Company maintains two stock options plans: the 1988 Plan and the
1997 Plan.
Ultrak, Inc. 1988 Non-Qualified Stock Option Plan ("1988 Plan")
The Company adopted the 1988 Plan on April 15, 1988, which covers an
aggregate of 1,000,000 shares of Common Stock of the Company. The 1988 Plan has
been amended on November 1, 1991, December 28, 1993 and September 27, 1996.
Pursuant to the 1988 Plan, options to purchase shares of Common Stock
may be issued to full-time employees, including officers, chosen by the
Compensation Committee of the Board of Directors. The options vest based upon
full-time employment with the Company at the rate of 20% per year over a
five-year period. The options expire ten years from the date of grant. The
option exercise price is based upon the approximate current value of the
Company's Common Stock on the date of grant. Options which are vested may be
exercised at any time thereafter and prior to the expiration of the option.
The options may be exercised for the entire amount of optioned shares
granted in the event (i) the optionee dies or becomes disabled, (ii) the Company
is merged, consolidated or reorganized, (iii) the Company is dissolved or
liquidated, (iv) substantially all property and assets of the Company are sold,
(v) if more than 50% ownership of the Company is transferred, or (vi) if the
employee is terminated, but not for cause, and his written employment agreement
so provides. Further, if an employee is dismissed for cause, unexercised options
to the extent vested may be exercised for 30 days before automatically expiring.
Ultrak, Inc. 1997 Incentive Stock Option Plan ("1997 Plan")
The 1997 Plan was adopted on May 23, 1997 pursuant to which options may
be granted to eligible employees and the non-employee directors of the Company
for the purchase of an aggregate of 400,000 shares of Common Stock of the
Company. Employees eligible under the 1997 Plan are the executive officers and
such other management employees determined by the Compensation Committee each
year. To be eligible for an option grant for a fiscal year, an otherwise
eligible employee or director must be employed by the Company or serve as a
director by January 1 of that year. The 1997 Plan is a formula-based plan
administered by the Compensation Committee. The Compensation Committee may grant
either nonqualified stock options or incentive stock options, as defined by the
Internal Revenue Code of 1986, as amended (the "Code").
Options are granted under the 1997 Plan based on the Company achieving
one or more of the following considerations for the fiscal year: (i) Economic
Value Added ("EVA"), the primary component of which is the amount of net income
for the year which exceeds a hurdle or target amount of return on stockholders'
equity, (ii) Market Value Added ("MVA"), the primary component of which is the
increase in the market value for the fiscal year of the Company as measured by
the price of its Common Stock or (iii) Budget Achievement ("Budget"), the
primary component of which is the Company's ability to meet and exceed its
approved financial budget for the fiscal year. Prior to December 31 of each
fiscal year, the Compensation Committee will determine the percentage that each
of the above considerations represents in the determination of grants under the
1997 Plan, which percentages must aggregate to 100%, and the maximum number of
options that can be granted based on the fiscal year's performance ("Option
Pool"), which cannot exceed 1% of the outstanding Common Stock of the Company.
Prior to December 31 of each fiscal year, the Compensation Committee will
determine the percentage that each eligible employee and non-employee director
is eligible to receive from the Option Pool.
As of December 31, 1997, options to purchase 1,000,656 shares were
outstanding under both the 1988 and 1997 Plans at exercise prices ranging from
$1.20 per share to $30.63 per share. Of the total options, options to
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<PAGE> 11
purchase 496,195 shares were subject to options held by the four executive
officers of the Company. The option exercise price is set by the Compensation
Committee of the Board of Directors on the date of grant near or at the then
verifiable market price of the Company's Common Stock. During 1997, 369,641
options were granted to employees of the Company at market price. During 1997,
8,108 options were exercised by four employees and options to purchase 19,652
shares were cancelled.
OPTION/SAR GRANTS, EXERCISES AND HOLDINGS
There were no exercises of stock options (or tandem SARs) and
freestanding SARs during 1997 by the named executive officers. The unexercised
options owned by the named executive officers as of December 31, 1997 are
presented below:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-
UNEXERCISED THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES VALUE AT 12/31/97 AT 12/31/97
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE # ($) UNEXERCISABLE UNEXERCISABLE
---- ---------- -------- ---------------- ------------------
<S> <C> <C> <C> <C>
George K. Broady -- -- 165,010/54,636 $1,046,925/106,800
James D. Pritchett -- -- 142,285/47,477 $ 901,012/53,475
Tim D. Torno -- -- 71,524/15,263 $ 374,257/26,700
</TABLE>
EMPLOYEE BENEFIT PLANS
The Company does not sponsor any defined benefit or actuarial plans.
However, the Company does sponsor a 401(k) plan for all eligible employees
whereby the Company matched 50% during 1997 of the employee's contribution up to
6% of the employee's base salary. In 1997, Messrs. Broady, Pritchett and Torno
received $2,522, $4,700 and $2,842, respectively, in matching 401(k)
contributions under the program.
During 1997, the Company provided a medical insurance program for its
full-time employees of which it paid 60% of the premium. As of December 31,
1997, the Company did not have any life insurance or any defined benefit
retirement or pension plans for its employees, officers or directors.
The Company has a policy that all loans from the Company or its
subsidiaries to its officers, directors and key employees or their affiliates
must be approved by a majority of disinterested directors. There were no loans
to officers, directors and/or key employees or their affiliates during 1997.
COMPENSATION OF DIRECTORS
Each director of the Company serves until the next annual meeting of
the Company's shareholders or until his successor is elected and qualified. Each
non-employee director receives an annual fee of $16,500, and officers and
directors are generally reimbursed for out-of-pocket expenses incurred in
connection with attendance at Board of Directors and committee meetings.
11
<PAGE> 12
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Messrs. James D. Pritchett, President of the Company, Theodore J.
Wlazlowski, Executive Vice of the Company, and Tim D. Torno, Vice
President-Finance, Treasurer, Secretary and Chief Financial Officer of the
Company, have written employment agreements with the Company with varying terms
and provisions. The Company has no termination of employment or
change-in-control arrangements, except as to the substantive effect of Mr.
Broady's stock ownership.
Mr. Pritchett's employment agreement, entered into in 1995, provides
for a two year term, but automatically extends for one year periods. Mr. Torno's
employment agreement was also entered into in 1995 and provides for a one year
term but automatically extends for one year periods. The employment agreements
originally set Mr. Pritchett's and Mr. Torno's base salaries at $198,000 and
$138,000, respectively, however, the Board of Directors may decide to compensate
the two at higher rates. The newly elected Executive Vice President, Mr.
Wlazlowski entered into an employment agreement in January 1998 which provides
for a two year term with renewal after the second anniversary date of the
agreement by mutual written agreement. The employment agreement for Mr.
Wlazlowski provides for a base salary of $180,000 per year which may be
increased by the Board of Directors. Mr. Wlazlowski also received a one time
bonus of $25,000 and a reimbursement of moving expenses. These employment
agreements are collectively known as ("Employment Agreements").
The Employment Agreements also contain standard provisions relating to
the employee being entitled to participation in the 1988 Plan and participation
in an annual bonus program. The agreements provide that the employee is to be
reimbursed for reasonable expenses incurred in connection with the Company's
business and certain relocation expenses. The agreements further provide for
standard paid vacations, other health and accident coverage and insurance
benefits.
The Company may terminate the Employment Agreements if the employee
commits a breach of the agreement, is convicted of a criminal offense, becomes
bankrupt, grossly neglects the performance of his duties or becomes chemically
addicted to alcohol, drugs or any controlled substance. If terminated by the
Company for any of those reasons, it is considered cause, and upon termination
for cause, all benefits, including all unexercised stock options previously
granted to the employee, are cancelled and rendered null and void. If the
Company terminates the employee without cause, then all unexercised options
become exercisable for the full amount of the optioned shares and the employee
is entitled to receive all compensation he would otherwise have been entitled to
receive under the terms of the agreement and all other benefits for a period of
18 months for Mr. Pritchett and a period of one year for Messrs. Torno and
Wlazlowski. If the employee terminates the agreement for any reason, he is
entitled to exercise only those options which are fully vested at the time of
termination and he must exercise them within 30 days of the date of termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
William C. Lee, Charles C. Neal and Robert F. Sexton are members of the
Compensation Committee of the Board of Directors. Each of Messrs. Lee, Neal and
Sexton is a non-employee director.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has furnished the following report on the
Company's executive compensation program. The report describes the Compensation
Committee's compensation policies applicable to the Company's executive officers
and provides specific information regarding the Chief Executive Officer's
compensation. The Compensation Committee of the Board of Directors of the
Company is comprised of Charles C. Neal, William C. Lee and Robert F. Sexton,
all of whom are non-employee directors.
The Compensation Committee views executive compensation as consisting
of three main components: base salary and benefits, annual incentives and
long-term incentives. The Compensation Committee's objective is to attract,
12
<PAGE> 13
retain and motivate executive officers through this combination to achieve
strategic and financial objectives to create value for the shareholders of
Ultrak. The Compensation Committee has created a total compensation package
which will determine compensation primarily on performance-based, objective
criteria, such as net income, net income per share, return on equity and returns
to shareholders through long-term appreciation of the Company's Common Stock.
The Compensation Committee would like to encourage ownership of Ultrak, Inc.
Common Stock by the executive officers and to tie a large portion of the
executive officers' compensation to the performance of the Company, hence to
align executive officers' interests more closely with shareholders' interests.
The Compensation Committee also wants to have a discretionary component to
reward exceptional individual achievement.
The Compensation Committee believes that Mr. Broady, as Chief Executive
Officer, significantly and directly influences the Company's overall
performance. Accordingly, the Compensation Committee uses base salary and
benefits, annual incentives and long-term incentives to retain and motivate Mr.
Broady and evaluates Mr. Broady's compensation in light of the Company's and his
performance. The Compensation Committee awarded Mr. Broady options to purchase
10,000 shares of Common Stock pursuant to the 1988 Plan. In addition, 20,795
options were awarded in 1997 under the 1997 Plan to Mr. Broady. These option
grants were made by the Compensation Committee in recognition of Mr. Broady's
crucial role in 1996 in the Company's growth in revenues and net income, the
consummation of two successful public offerings of the Common Stock and
agreements for some and consummation of other important acquisitions.
In 1997, no payments were made to the executive officers pursuant to
the long term incentive plan for 1997. In addition, no bonuses were paid to the
executive officers in 1997. Jim Pritchett received an annual salary increase of
$10,000 at the time he became President in August 1997, as well as 20,000
options pursuant to the Company's 1988 Option Plan.
The Compensation Committee reviewed the salaries and bonuses of the
executive officers in late 1997. The Compensation Committee also reviewed the
performance of executive officers and the Company during 1997. The Compensation
Committee considered the Company's growth in revenues, consummation of important
acquisitions and investments, expenses and overall financial results. Based upon
its analysis, the Compensation Committee decided to increase the base salaries
of George K. Broady, James D. Pritchett and Tim D. Torno by approximately 3% for
1998.
Charles C. Neal
William C. Lee
Robert F. Sexton
13
<PAGE> 14
PERFORMANCE GRAPHS
The following chart compares the cumulative total shareholder return on
the Common Stock during the five fiscal years ended December 31, 1997 with the
cumulative total return on the Nasdaq Stock Market index and a self-determined
peer group. The self-determined peer group consists of ten companies actively
competing with the Company in the security industry.
The Company relied upon information provided by the University of
Chicago Center for Research in Securities Prices with respect to the peer group
stock performance. The Company did not attempt to validate the information
supplied to it other than to review it for reasonableness. The comparison
assumes $100 was invested on December 31, 1992 in the Common Stock and in each
of the foregoing indices and assumes reinvestment of dividends, if any.
Adjustments have been made to give retroactive effect to the December 1993
one-for-six reverse stock split.
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
ULTRAK,INC.
Prepared by the Center for Research in Security Prices
Produced on 02/12/98 including data to 12/31/97
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
100.0 115.1 115.1 104.0 492.7 148.4
100.0 114.8 112.2 158.7 195.2 239.5
100.0 137.4 139.4 113.8 115.0 115.2
</TABLE>
[CHART]
Ultrak, Inc.
Nasdaq Stock Market (US Companies)
Self-Determined Peer Group
Companies in the Self-Determined Peer Group
CHECKPOINT SYSTEMS INC.
KNOGO NORTH AMERICA INC
MAGAL SECURITY SYSTEMS LTD
ROLLINS INC
VICON INDUSTRIES INC
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.00 on 12/31/92.
14
<PAGE> 15
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of the Company's Common Stock and Series A Preferred Stock
as of December 31, 1997 by (i) each person who is known to the Company to own
beneficially more than five percent of the outstanding shares of Common Stock or
the outstanding shares of Series A Preferred Stock of the Company and their
address, (ii) each executive officer and director, (iii) each nominee for
director and (iv) all executive officers and directors as a group.
<TABLE>
<CAPTION>
COMMON STOCK(1) SERIES A PREFERRED STOCK(1)
---------------------- -----------------------------
SHARES PERCENTAGE SHARES PERCENTAGE
--------- ---------- -------- ----------
<S> <C> <C> <C> <C>
George K. Broady(2) 2,035,394 13.6% 195,351 100.0%
James D. Pritchett(3) 197,714 1.4% -- --
Roland Scetbon(4) 205,013 1.4% -- --
Tim D. Torno(5) 71,758 * -- --
William C. Lee 29,667 * -- --
Charles C. Neal(6) 170,650 1.2% -- --
Robert F. Sexton(7) 103,066 * -- --
All executive officers and directors 2,813,262 18.5% 195,351 100.0%
as a group (seven persons)(8)
</TABLE>
- ------------------
* less than 1%
(1) Except as otherwise indicated, the persons named in the table possess sole
voting and investment power with respect to all shares shown as
beneficially owned.
(2) Includes 165,010 shares issuable upon exercise of stock options currently
exercisable or exercisable within 60 days and 406,981 shares issuable upon
conversion of shares of the Series A Preferred Stock owned by Mr. Broady.
Mr. Broady owns all 195,351 outstanding shares of Series A Preferred Stock
and each share of Series A Preferred Stock has 16.667 votes on all matters
submitted to a vote of shareholders. Through his ownership of Common Stock
and the Series A Preferred Stock, Mr. Broady controls approximately 26.7%
of the voting power of all outstanding shares of capital stock. Mr.
Broady's address is 1301 Waters Ridge Drive, Lewisville, Texas 75057.
(3) Includes 142,285 shares issuable upon exercise of stock options currently
exercisable or exercisable within 60 days held by Mr. Pritchett.
(4) All of the shares are owned by Frida, S.A., a corporation owned by Mr.
Scetbon.
(5) Includes 71,524 shares issuable upon exercise of stock options currently
exercisable or exercisable within 60 days held by Mr. Torno.
(6) Comprised of 9,650 shares owned by Pantheon, Incorporated, a corporation
owned by Mr. Neal and his wife, and 161,000 shares owned by Chas. A. Neal &
Company, a corporation of which Mr. Neal is President.
(7) Includes 5,556 shares owned by Mr. Sexton's wife.
(8) Includes options to purchase an aggregate of 378,819 shares held by Messrs.
Broady, Pritchett and Torno.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997 the Company made purchases of approximately $361,000 from
Ultrak Electronics Limited, a Hong Kong corporation of which Mr. Broady owns
approximately 49% of the capital stock. The Company believes that the terms of
these purchases were made at prices and on terms at least as favorable to the
Company as those which could have been obtained in an arm's length transaction
with an unaffiliated party.
Effective October 1996, the Company acquired all of the outstanding
share capital of Bisset for $5.0 million in cash and a total of 456,522 shares
of common stock valued at $8.5 million. Roland Scetbon, a director of the
Company, was one of the former owners of Bisset, and was elected as a director
in conjunction with the acquisition of Bisset.
15
<PAGE> 16
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton LLP has served as independent certified public
accountants to audit the accounts of the Company for the fiscal year ending
December 31, 1997. If the shareholders of the Company do not approve such
appointment, the Board of Directors will not appoint the firm as auditors for
the fiscal year ending December 31, 1998. Approval of the appointment of Grant
Thornton LLP requires the affirmative vote equal to at least a majority of the
votes cast at the Meeting in person or by Proxy. Representatives of Grant
Thornton LLP are expected to be present at the Meeting with the opportunity to
make a statement if they desire to do so and to be available to respond to
appropriate questions.
OTHER BUSINESS
The Board of Directors knows of no matter other than those described
herein that will be presented for consideration at the Meeting. However, should
any other matters properly come before the Meeting or any adjournment thereof,
it is the intention of the persons named in the accompanying Proxy to vote in
accordance with their best judgment in the interest of the Company.
SHAREHOLDER PROPOSALS
Shareholders may submit proposals on matters appropriate for
shareholder action at subsequent annual meetings of the Company consistent with
Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended.
For such proposals to be considered for inclusion in the Proxy Statement and
Proxy relating to the 1998 Annual Meeting of Shareholders, such proposals must
be received by the Company not later than January 20, 1999. Such proposals
should be directed to Ultrak, Inc., 1301 Waters Ridge Drive, Lewisville, Texas
75057 Attention: Secretary.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and persons who own more than 10% of the Common
Stock or securities convertible into Common Stock, to file with the Securities
and Exchange Commission ("SEC") and the Nasdaq National Market reports of
ownership and reports of changes in ownership in the Common Stock and securities
convertible into Common Stock of the Company. Such officers, directors and
greater than 10% shareholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required during its fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% shareholders were complied with the exception of the following:
Mr. Torno filed a Form 4 late with respect to an option grant in April 1997. Mr.
Broady filed a Form 4 late and Mr. Pritchett filed two Form 4's late for options
received in 1997.
16
<PAGE> 17
MISCELLANEOUS
All costs incurred in the solicitation of Proxies will be borne by the
Company. In addition to the solicitation by mail, officers and employees of the
Company may solicit Proxies by telephone, telegraph or personally, without
additional compensation. The Company may also make arrangements with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of shares of Common Stock held
of record by such persons, and the Company may reimburse such brokerage houses
and other custodians, nominees and fiduciaries for their out-of-pocket expenses
incurred in connection therewith.
The Company's Annual Report for the fiscal year ended December 31,
1997 (the "Annual Report") accompanies this Proxy Statement. The Annual Report
is not to be deemed part of this Proxy Statement.
By Order of the Board of Directors,
/s/ TIM D. TORNO
Tim D. Torno
Secretary
Lewisville, Texas
April 24, 1998
17
<PAGE> 18
[ULTRAK LOGO]
1301 Waters Ridge Drive
Lewisville, Texas 75057
Tel: (972) 353-6500
Fax: (972) 353-6574
18
<PAGE> 19
ULTRAK, INC.
PROXY CARD
The undersigned hereby (i) acknowledges receipt of the Notice dated April 24,
1998 of the Annual Meeting of Shareholders of Ultrak, Inc. (the "Company") to be
held at 1301 Waters Ridge Drive, Lewisville, Texas 75057, on Friday, May 29,
1998 at 9:00 a.m., central daylight time, and the Proxy Statement in connection
therewith; and (ii) appoints George K. Broady and Tim D. Torno, and each of
them, the undersigned's proxies with full power of substitution, for and in the
name, place and stead of the undersigned, to vote upon and act with respect to
all of the shares of Common Stock and Preferred Stock of the Company standing in
the name of the undersigned or with respect to which the undersigned is entitled
to vote and act, at the meeting and at any adjournment thereof, and the
undersigned directs that his proxy be voted as follows:
(a) Proposal To Elect Six Directors To Serve Until The Next
Annual Meeting Of Shareholders Or Until Their Respective
Successors Are Elected And Qualified.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
vote for all (except as marked to the contrary) nominees listed below
Directors: George K. Broady, James D. Pritchett, William C.
Lee, Charles C. Neal, Robert F. Sexton and Roland Scetbon.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
(b) Proposal To Approve The Selection By The Board Of
Directors Of Grant Thornton LLP As The Firm Of Independent
Certified Public Accountants To Audit The Accounts Of The
Company For The Fiscal Year Ending December 31, 1998
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(c) In The Discretion Of The Proxies On Any Other Matter That
May Properly Come Before The Meeting Or Any Adjournment
Thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on reverse side)
(Continued from other side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED. UNLESS
OTHERWISE MARKED, THIS PROXY WILL BE VOTED FOR THE MATTERS SPECIFICALLY REFERRED
TO ABOVE.
If more than one of the proxies named above shall be present in person or by
substitute at the meeting or any adjournment thereof, both of the proxies so
present and voting, either in person or by substitute, shall exercise all of the
proxies hereby given.
19
<PAGE> 20
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such Common Stock and Preferred Stock and hereby
ratifies and confirms all that the proxies, their substitutes, or any of them
may lawfully do by virtue hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
Signature:_____________________________
Printed Name:__________________________
Dated:_________________________________
Please date this Proxy and sign your name exactly as it appears hereon.
Where there is more than one owner, each should sign. When signing as an
attorney, administrator, executor, guardian or trustee, please add your title as
such. If executed by a corporation, the Proxy should be signed by a duly
authorized officer.
Please date, sign and mail this proxy card in the enclosed envelope. No
postage is required.
20
